SoftBank on shopping spree in US market
TOKYO -- SoftBank is seeking to bring another American wireless carrier under its umbrella to solidify its position in the growing U.S. market, the birthplace of cutting-edge mobile Internet technologies.
The Japanese company hopes to purchase fourth-ranked T-Mobile US, following its July acquisition of third-ranked Sprint, which had some 55 million subscribers as of Sept. 30. With the deal, SoftBank would be able to quickly expand its U.S. subscriber base to 100 million. This would put the new merged entity in the same league as Verizon Wireless and AT&T.
Sprint has been struggling in the shadow of the twin industry giants, with customers jumping ship and the company suffering operating losses.
Meanwhile, Germany's Deutsche Telekom has been looking for ways to deal with the problem of U.S. unit T-Mobile bleeding red ink. T-Mobile had about 45 million subscribers at the end of September.
SoftBank apparently aims to first bulk up the group to the scale of Verizon Wireless and AT&T, then build a high-speed wireless network across the U.S. while improving profitability by cutting costs through eliminating overlapping equipment and other steps.
The U.S. is an important market for wireless carriers. It not only boasts the third-largest number of users, after China and India, but also develops video and other state-of-the-art services. SoftBank sees a robust mobile network spanning Japan and the U.S. as a way to increase opportunities to provide diverse services, including games and shopping, to Europe and Asia.
The U.S. Federal Communications Commission and Department of Justice will have to approve a merger between Sprint and T-Mobile. In 2011, American regulators objected to AT&T's plan to purchase T-Mobile's predecessor on the view that the deal would harm competition, prompting AT&T to abandon its bid. SoftBank apparently believes that the antitrust hurdles will be lower this time around because the third- and fourth-ranked carriers seek to merge in order to compete with the top two players.
SoftBank's interest-bearing debt totaled 8.84 trillion yen ($83.9 billion) as of Sept. 30, up 140% from six months earlier. Interest payments on loans and bonds are estimated at 300 billion yen for the fiscal year ending March 2015. Acquiring T-Mobile for an estimated price of more than 2 trillion yen would increase the Japanese company's interest-bearing debt, since the deal is expected to be made in cash.
SoftBank chief Masayoshi Son has explained that his firm has a lower debt-to-profit ratio than it did when it purchased the local arm of the U.K.'s Vodafone back in 2006. Now, SoftBank will be taking on the challenge of succeeding in the U.S. market while saddled with massive debt.