Sprint And SoftBank Merge To Become No. 3 Company In The World
Despite its deceiving name, SoftBank is not a financial institution but actually a Japanese communication company. In Japan SoftBank is much like Sprint in the United States being the third largest cell phone company, but with this takeover both companies leapfrog to third largest in the world behind China Mobile and Verizon. SoftBank also takes pride in their ability to turn around struggling businesses such as Vodafone and Japanese Telecom, although Sprint may be their most difficult and surely risky endeavor.
Sprint for many years has been mired as the number three cell phone company in America but the new hope is that SoftBank will infuse enough capital to give Sprint the chance to compete, mostly by improving their LTE capabilities. After giving up on WiMax Sprint has been adding LTE to their infrastructure and plan by sometime in 2013 to have LTE in a hundred cities. A good number until you realize Verizon should have their LTE in about 417 cities by the end of this year. Sprint also paid $15.5 billion to Apple just for the right to carry the iPhone. Even with LTE, albeit limited LTE and the iPhone Sprint still wound up losing $1 billion at the end of the second quarter.
In Japan SoftBank’s take over of Sprint has also been met with a degree of restraint with SoftBanks’s stock dropping by about five cents. What also has many stockbrokers apprehensive is that SoftBank is paying a portion of it with on hand cash but the rest will be in loans. The other worry is the deal doesn’t add to the wireless network like the T-mobile MetroPCS merger. President Masayoshi Son disagrees and states, “As we have proven in Japan, we have achieved a V-shaped earnings recovery in the acquired mobile business and grown dramatically by introducing differentiated products and innovative services to an incumbent-led market. Our track record of innovation, combined with Sprint’s strong brand and local leadership, provides a constructive beginning toward creating a more competitive American mobile market.”
Of course in the near term Sprint customers shouldn’t worry about their service because much like the T-Mobile MetroPCS merger it will be a few months before this is deal is official because regulators have to approve the deal first. Unlike the AT&T merger though, SoftBank is strengthening Sprint and should increase competition so the deal should pass through easily. Dan Hesse will also remain the CEO even after the deal should be approved. This deal is more of a long term investment so Sprint customers shouldn’t worry about losing their True Unlimited plans, since it is one of Sprints defining characteristics when compared to AT&T, Verizon and even T-Mobile who have “Unlimited” plans that are throttled after 5 GB if you tether. Even with all the caveats in the SoftBank takeover, the deal will hopefully lead to a more competitive market, which will benefit customers in all of the United States.
Reach Contributor Roger Aguirre here.