ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Business

SoftBank rethinks US mobile plans with merger out of picture

Japanese giant must plot new course for Sprint amid industry realignment

SoftBank Group Chairman and CEO Masayoshi Son

TOKYO -- SoftBank Group has given up on a long-sought merger between American wireless unit Sprint and peer T-Mobile US, forcing it to consider other options and possibly even partners from other industries to achieve the scale needed to challenge dominant rivals.

Many directors insisted at a board meeting Friday that any merger deal give the Japanese technology behemoth control of the combined entity. Reports had already emerged of T-Mobile parent Deutsche Telekom also digging in on this point. With SoftBank Chairman and CEO Masayoshi Son showing no intention of handing over the reins, it was all but decided to call the negotiations off.

This marked SoftBank's second attempt to combine Sprint, the fourth-largest carrier in the U.S., with third-ranked T-Mobile. The aim of these efforts was clear: to expand Sprint's customer base while improving network reliability to attract even more subscribers. SoftBank hoped to challenge the duopoly of Verizon Communications and AT&T by working from the same playbook it used to turn Japanese operations of British carrier Vodafone into a cash cow after acquiring them 11 years ago.

The first attempt to strike a deal, coming the year after the 2013 acquisition of Sprint, was scrapped amid opposition by the U.S. Federal Communications Commission on antitrust grounds. SoftBank reopened talks after the inauguration of President Donald Trump, whose administration was expected to be more deregulation-friendly. But the board ultimately concluded that engineering a merger would be pointless if SoftBank could not retain control.

Sprint shares tumbled 13% to a roughly one-year low of $6.05 at one point Monday as the breakdown raised questions about the carrier's growth potential. T-Mobile also slumped as much as 6%.

The damage extended to SoftBank, which ended Tuesday down 5% in Tokyo. "The overall group's need for funds to improve competitiveness may increase," said Tetsuro Tsusaka of Morgan Stanley MUFG Securities. Investors worry that the loss of what was likely a central element of the tech company's U.S. growth strategy could lead it to step up borrowing instead.

The next-best things

But SoftBank is not without options for Sprint. Rumors still swirl of talks on a possible partnership with American cable television providers, including second-ranked Charter Communications. Such a cross-industry deal would let both sides tap each other's subscribers.

The American wireless industry is undergoing a major realignment ahead of the commercialization of 5G communications technology. The two market leaders are expanding ties to other industries, with Verizon buying core operations of Yahoo in June and AT&T reaching a deal in October 2016 to acquire media group Time Warner. Son worries that Sprint may end up late to the game.

The SoftBank chief's ambitions for the industry go far beyond mobile devices. "Telecommunications [networks] will form the basic infrastructure of the information revolution, with the U.S. being the world's largest market," he told The Nikkei on Oct. 19.

Son sees wireless companies like Sprint as vital to such developments as autonomous driving technology and networking of home appliances. Having vehicles and devices constantly connected to the internet would provide a steady stream of profits.

But until then, rehabilitating Sprint into a contributor to the SoftBank group rather than a drag on earnings may prove difficult. The carrier logged its first profit in three years in the April-June period but slumped back into the red the following quarter.

(Nikkei)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media