Michael Finneran
Michael F. Finneran, President of dBrn Associates, Inc. is a consultant and industry analyst specializing in wireless, mobile unified communications,...
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Michael Finneran | October 15, 2012 |


Softbank to Invest $20 Billion for 70% of Sprint

Softbank to Invest $20 Billion for 70% of Sprint The investment should give Sprint some breathing room as it shuts down its aging Nextel iDen network while rolling out LTE.

The investment should give Sprint some breathing room as it shuts down its aging Nextel iDen network while rolling out LTE.

Hot on the heels of the announcement of the planned merger between T-Mobile and Metro PCS, Sprint and Softbank announced the latter will invest $20 billion for a 70% share in the number 3 US wireless carrier. As the deal is structured, Softbank will pay $8 billion to buy newly issued Sprint stock at about $5.25 a share. It will also buy $12.1 billion of existing stock from investors at $7.30 a share. Sprint's stock had risen 14% since the deal was first disclosed on Thursday, and it had closed at $5.73 Friday. CEO Dan Hesse will remain as at the helm.

Sprint has lost money in each of the last 19 quarters, and the cash infusion should be welcome; the company is currently holding $21 billion in debt, some of which is set to mature next year. In the meantime, Sprint is involved in a $7 billion network upgrade they term Vision, but it is still behind Verizon and AT&T in its LTE rollout.

Given its smaller market share, the deal is not likely to raise the concerns we saw last year when AT&T attempted to merge with T-Mobile. Indeed, many analysts had been predicting some consolidation among the smaller operators. According to Strategy Analytics, Sprint has roughly 55 million subscribers versus around 110 million for Verizon and 105 million for AT&T. The combined T-Mobile/Metro PCS should have about 45 million, so Sprint will retain its number 3 position in the US market.

Softbank's chief executive, Masayoshi Son, is an Internet entrepreneur who got into the mobile business in Japan buying Vodafone's Japanese arm in 2006. The company is now poised to become Japan's second-biggest wireless service provider after NTT DoCoMo. Up until the release of the iPhone 4s, Softbank was the only Japanese provider to offer the iPhone; KDDI now sells it as well.

Sprint has always been one of the more creative mobile operators. Its Mobile Integration service allows a direct MPLS connection from an enterprise PBX to Sprint's mobile network, with the ability to ring calls to the user's desk and mobile phones simultaneously. At Enterprise Connect last spring, Sprint announced they would offer Cisco's Hosted Collaboration Service (HCS) under the name Complete Collaboration.

The investment from Softbank should give Sprint some breathing room as it shuts down its aging Nextel iDen network while rolling out LTE. There is also speculation that Sprint may increase its holdings in mobile broadband provider Clearwire; Sprint currently owns 48% of the company. From the sounds of the announcement, it seems that Sprint will continue to operate independently, and Mr. Son is more interested in making an investment in the US market to offset stagnating growth in the Japanese market.

At the announcement Mr Son said, "It could be safe if you do nothing, and our challenge in the U.S. is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built. But not taking this challenge will be a bigger risk."


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