Commentary

After Charter Spurns Sprint, Parent SoftBank May Bid For Charter

One thing seems to be clear in the array of purported offers Sprint and Softbank honcho Masayoshi Son has been making, or intends to make. He wants a big piece of the U.S. cable pie.

On Friday evening, the Wall Street Journal’s Ryan Knutson and Dana Cimilluca broke the news that Son’s Sprint Corp. had proposed a merger with Charter Communications that would create “a new publicly traded entity that would combine Sprint and Charter and be controlled by Japan’s SoftBank Group Corp. … Sprint has a market value of $33 billion and about that much in net debt. Charter has a market value of nearly $100 billion after swallowing Time Warner Cable Inc. last year and more than $60 billion of net debt.”

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The combination of Sprint and Charter “would create a media and communications giant, upending industries that are already in the throes of dramatic change,” Knutson and Cimilluca observed.

But Charter spurned its suitor yesterday.

“We understand why a deal is attractive for SoftBank, but Charter has no interest in acquiring Sprint,” a Charter spokesman emailed Reuters’ Greg Roumeliotis and Liana B. Baker on Sunday.

“SoftBank's potential bid for Charter would follow the conclusion of two months of negotiations with Charter and larger cable peer Comcast Corp over Sprint potentially serving as their mobile virtual network operator (MVNO), allowing them to use its network to offer wireless services,” Roumeliotis and Baker write.

“We have a very good MVNO relationship with Verizon Communications Inc and intend to launch wireless services to cable customers next year,” Charter maintained in its email.

But Son is nothing if not determined to make a long-term impact (like 300 years worth) on the global business world, as we discovered during his pursuit of Sprint itself five years ago this October. In the short term, though, he apparently is determined to hitch up with Charter.

“Undeterred, the Japanese billionaire is now mustering an offer from SoftBank to buy Charter outright, according to a person with knowledge of his plans. He intends to make the offer this week, the person said,” while cautioning that the “plan could change,” Bloomberg’s Scott Moritz and Gerry Smith write this morning. 

“Bidding for Charter … would mark the most ambitious target yet for Son, whose deal spree has made SoftBank one of the most debt-laden companies in Japan,” they continue.

“Son is going back to his bad old days of wanting to conquer the world, just as we thought he was becoming more sensible,” Amir Anvarzadeh, head of Japanese equity sales at BGC Partners Inc. in Singapore, tells Moritz and Smith. “It does sound as if they’re doing anythingbut de-leveraging. They’re re-leveraging.”

Writing for 24/7 Wall St., Douglas A. McIntyre observes that “Son wants to have a company that can spin off bundles of services. Sprint would be the wireless part of a consumer package. Charter would be the cable portion. This would offer potential customers ‘one-stop shopping’ for broadband to the home, cable television and wireless services. It might also be the only way troubled Sprint can increase its customer base.”

Complicating the matter, though, is the fact that “Charter and Comcast had jointly agreed this spring not to start merger or acquisition talks with another wireless company for at least a year without each other's participation or go-ahead,” the Washington Post’s Brain Fung wrote Friday.

“The cable industry has been seeking a way to enter the wireless business for years; as Americans increasingly shift their Internet consumption to mobile devices and take their data usage to go, traditional cellular carriers such as AT&T and Verizon have stood to benefit massively at the expense of home Internet providers such as Comcast and Charter,” Fung continues.

The WSJ’s Knutson and Cimilluca, however, tell us in their Friday article that sources tell them that “John Malone, whose Liberty Broadband Corp. is Charter’s largest investor, had been trying to convince Comcast Chief Executive Brian Roberts that the companies should jointly buy a wireless carrier.”  

“We really feel we’re not missing anything,” the balky Roberts said on a conference call this week, they report. “No disrespect to wireless. It’s a tough business.”  

Indeed. What isn’t nowadays if you’re not Amazon, Google or Facebook?

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