Why Softbank is buying Sprint NOW
Japan's Softbank is buying 70% of SprintNextel. "Why" from Sprint side is pretty obvious - they need money. A lot of it, for LTE deployment, and to kill 4th and under competitors.
But from Softbank side, the gain is not very clear. Today's Softbank press release talks about their synergy in building "next generation mobile internet company" and they can provide know-how of turn around. You, as an industry person, know these are just the templates. It really does not have any meat. Well, at least Yen exchange rate helps, but really, why?
Some say it is just Mr. Son's ego. He is eager to expand his business internationally, and he just could not resist the temptation of this opportunity. Others say he can gain a lot of political clout against Japanese regulatory body - utilizing US pressure, often referred as "gaiatsu" (outside pressure) in Japanese. Some Japanese analyst complain that Son should invest that money into his own network to improve its notoriously poor connection. Yes, that is true, there will be no direct benefit to Japanese subscribers.
But after all, does it worth 20 billion dollars, right after Softbank finally shrunk its HUGE debt for Vodafone Japan acquisition to a manageable size?
Well, I am guessing that Masayoshi Son is betting on Dan Hesse. Sprint has already made a lot of improvement since he took helm. They cleaned up the customer service mess, cut cost and obtained iPhone in their line up. They have done a good job in things that does not require a large sum of investment. But now they have to get onto the real network mess clean up. And also, Hesse practically throw T-mobile into a tank when he successfully blocked its merger with AT&T, and he still is trying to kick them off into a cliff, taking everyone who is climbing up under him.
If, at this moment, he gets enough money NOW and become successful? Sprint share price will shoot up. Son can pocket a huge capital gain. He can use the money for anything then, be it Japanese network improvement or his new pet project, solar power generation.
In my "telecom economy 10 year cycle" theory, now is the "down" time for both fixed and mobile network. If my theory is correct, fixed network will turn around in 2015, and mobile in 2018. Sprint is planning to finish its network transition in 2017. So it is actually a pretty good timing.
I have been involved and observed the "telecom industry globalization" and leaned that international investment into "local" portion (including mobile) of the network is VERY hard to succeed in long term, except for within Europe (their "country" is about the size of "state" in the US) and for the cases of former colonies (such as former British Empire and Spain-LatAm). But if you look at it as "5 year" turn around investment between 2012 and 2017, it looks reasonable.
As long as you believe Dan Hesse can do it as he promised. And I guess Son believes he can, and Son is betting hugely, as his once-in-a-lifetime opportunity. He is a crazy guy who bet on some smaller but similar opportunity and has been successful.
So let's see if his horse will win or lose.