SoftBank of Japan to Buy Sprint in $20.1 Billion Deal
10/15/2012 by: Anshel Sag
Sprint and SoftBank today together announced that SoftBank of Japan would be acquiring 70% of Sprint's current shares at $7.30 per share. This, in conjunction with the creation of a new block of shares at $5 will amount to $20.1 billion with $12B being needed to purchase the existing shareholder equity to acquire the initial 70%. The $20.1 billion acquisition will be funded through a combination of cash and debt. For those unfamiliar with SoftBank, they are actually a Japanese telecommunications company that has experience in internet and mobile telephony and internet TV.
Currently, Sprint is still the #3 carrier in the US and have been fighting an uphill battle against Verizon and AT&T, a similar position that their other competitor, T-Mobile, has also found itself in. Dan Hesse, CEO of Sprint, has found himself fighting acquisitions like AT&T's proposed acquisition of T-Mobile which ultimately failed. Sprint is currently on a plan to improve the company by reducing customer complaints, improving customer service, and reducing overall network overhead costs.
Currently, Sprint's business units are primarily Sprint, BoostMobile and Virgin. Sprint is their only post-paid service, and both BoostMobile and Virgin are both non-contractual. However, Sprint's goal for the future is to now push forward heavy investment (such as the SoftBank purchase) and to shut down old networks and to improve current and future generation networks.
Sprint is looking to shut down their iDen push-to-talk network in order to save themselves over $1 billion in costs to run a network that simply does not have people using it. Additionally, getting rid of this network enables them to further deploy their LTE network which will be the future of the company and enable Sprint to become a strong third carrier in the US. They are also looking to improve their current network's 3G speeds and functionality by adding the push-to-talk function of the iDen network acquired from the Nextel purchase. This push-to-talk availability on 3G devices should quell any sorts of dissatisfaction with the loss of the iDen push-to-talk network.
Sprint's goal with the SoftBank acquisition is to learn from SoftBank's success in Japan with their Japanese carrier and LTE deployment. Sprint is using the SoftBank acquisition to infuse themselves with more cash to invest in improving the network and simultaneously learn from SoftBank's success with wireless carriers. Considering the fact that Sprint failed to successfully deploy WiMax, we are hopeful that Sprint will be able to utilize current infrastructure to deploy LTE at speeds that are competitive to Verizon and AT&T. Locally, in San Diego, we actually never got WiMax coverage and as a result, many Sprint customers find themselves frustrated with the lack of speed of the network.
Hopefully SoftBank's LTE play will help create a new, more powerful, third carrier to boost competition and lower prices. We must warn you though, SoftBank has purchased tech companies before in the past and they were actually not successful. One such case was when SoftBank purchased 75% of Kingston Technology (the world's leading manufacturer of DRAM) and eventually ended up selling it back to the two founders two years later. The company did not go bankrupt or fail, and is actually more successful than ever. But, this proves that SoftBank may have been very successful in recent history, but they do not have a flawless acquisition history as they would like others to believe.
Nevertheless, this looks to be a different case and we want to see SoftBank and Sprint be successful in creating a strong third player in the carrier game, because we all know that consumers desperately need it.
Sprint, SoftBank, LTE, Network, Smartphones, Mobile, Customer Service, Boost Mobile, Virgin Mobile
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