Talk about a game changer: a nearly $13 billion bid for 70% of Sprint Nextel by the Japanese phone and Internet company Softbank could “transform” the mobile market in the U.S., the Wall Street Journalreports, by providing capital for the lagging No. 3 carrier to not only build its next-generation network but also to buy pesky smaller fry that “compete aggressively on price.”
“Two giants [Verizon and AT&T] overwhelmingly dominate the wireless market in the United States,” as Michael J. de la Merced and Brian X. Chen point out in their lede in the New York Times. “Now a merger deal is in the works that could produce a robust challenger.”
The merger discussions, started “a week after Deutsche Telekom, the parent of T-Mobile USA, announced a reverse takeover of another smaller company in cell phone service, MetroPCS,” were confirmed by Sprint Nextel yesterday. It said it would not comment further “unless and until an agreement is reached.”
The Journal’s Anupreeta Das, Anton Troianovski and Daisuke Wakabayashi report that “potential hurdles include winning over Sprint's shareholders and resolving a complex relationship between Sprint and partner Clearwire Corp.,” the mobile-broadband provider. Sprint currently owns a 49% stake but Softbank would like to see it take control of the company, which “owns valuable spectrum rights that Sprint could use for its new network.”
One outcome of the deal, independent telecommunications analyst Chetan Sharma tells the Times, could be the introduction of new services to the U.S. market. “Japanese and South Korean carriers are leading the way with innovative mobile services, he said, including mobile payments and analytics that look at a customer’s personal data to provide better map directions or recommendations for things to buy. Such services could open doors to new methods of mobile advertising for Sprint.”
Softbank’s founder, chairman and CEO, Masayoshi Son, 55, has Kardashian-like Twitter numbers –- more than 1.7 million followers -- and was purportedly the world’s 127th richest man last year, with a fortune estimated at $7.2 billion, according to Forbes. That’s down from nearly $69 billion at the peak of the dot-com bubble in February 2000, Kerry A. Dolan reports, but up from the mere $1.1 billion he had to play around with in 2003.
He’s evidently not the type of guy to look backwards, however. In 2010, Bloomberg’s Dave McCombs and Pavel Alpeyev tell us, Son “laid out a plan for the next 300 years. For a start, he would invest in 5,000 companies by 2040, giving his unborn successors a base to build on.” In a “Darwinian comparison of business to living species,” Son concluded that “99.98% of companies would cease to exist in their current form over the next 30 years.” He clearly intends Softbank to be one of .02% that does not.
Of Korean heritage, Son’s teenage idol was the late Den Fujita, founder of McDonald’s in Japan, who suggested that he learn English, according to a biography at 4-Traders. Son studied at Berkeley and invented a voice-operated multilingual translator that he sold to Sharp for about $1.25 million in today’s dollars. He was 23 when he started Nihon Softbank back in Japan a couple of years later.
“A person’s life is over in 50, 100 years,” Son said in discussing his 300-year plan for his enterprises. “But a company lives on through the people it is composed of and Softbank group has to survive even after I’m gone.”
Sprint’s market value jumped by $2 billion to about $17 billion on news of the talks, Reuters’ Taro Fuse and Mari Saito report this morning while writing that at least one brokerage is warning “that a deal of this size could leave Softbank with ‘unacceptably high’ levels of debt.” But if the deal goes through, it looks like Sprint may have found itself a lifeline –- if not necessarily for the coming three centuries, then at least for the coming years.