Softbank Group are undergoing huge change at the moment, with the GBP25bln acquisition of ARM, announcement of the Vision Growth Fund and USD3.5bln acquisition of Fortress Investment Group. Given this, the Nikkei wonders if Sprint may be sold.
I’m not great at translating articles, but had a go with this one as below.
Sprint disposal to continue? SoftBank at the crossroads
SoftBank Group is at the crossroads with its American mobile telephony business. Profitability has recovered at Sprint, the major US Mobile company acquired in 2013, but not as quickly as its two major competitors, Verizon Communications and AT&T. The Trump administration has promoted the liberalisation of regulation in the telecommunication industry, and may embark upon an industry reorganisation. It’s being asked if this will be next.
[Sprint is reconciled to 4th place in the US telecoms industry. 1st is Verizon Communications, 2nd is AT&T, 3rd T-Mobile, 4th Sprint]
On 17 Feb Reuters reported that in relation to the US business of SoftBank, Sprint is considering to transfer its operating rights to 3rd placed T-Mobile. At present, bids are being tendered for radio bandwidth; operators are not allowed to make direct contact, though the prohibition will stop after the bidding process is completed in April. The process is beginning to sell Sprint to Deutsche Telecom, the parent company of T-Mobile.
Sprints’ results (2016 April to December) show operating profit of USD1.3bln (c. JPY147bln). With an estimate of USD2bln for the full year, yoy improvement of 4.3x is forecast due to cost reductions and network improvements. Profitability has improved: upon Softbank purchasing the company in 2013, in the same period the company posted a USD1.9bln loss.
Despite this, the observation that Sprint may be sold arises from a harsh view that can be taken due to the lack of business growth.
US telecom market share has been floundering since Sprint dropped to 4th place below T-Mobile in 2015. Top 2 have picked up customer numbers via a recent price offensive; and within this war of attrition have offered ‘unlimited use’ plans for the first time in 6 years.
If SoftBank were to dispose of Sprint, this would mark a withdrawal from the US telecoms market. Sources within Softbank claim that the Sprint sale is not under consideration. Telecoms Infrastructure would be a key weapon in developing business related to the Internet of Things [IoT] in the US.
In fact, Softbank tried to sell Sprint at the end of 2014. The initial plan to buy T-Mobile as a set failed due to resistance by US authorities. At that time, the internal view turned towards withdrawing via a sale. After this, CEO Masayoshi Son took a unilateral executive decision to keep Sprint.
In 2016 Son reiterated bullish statements such as “Sprint was shackled, but now can turn back on the offensive”, and “Sprint on its own can reach the scale to be a global leader”.
In which case, how can Sprint grow? After the inauguration of the Trump administration, Son remarked that he was ‘openly investigating’ options. Multiple choices available included reorganisation with an industry competitor. Within the US, merger with a cable TV or broadcasting firm could also be considered a powerful step forward.
SoftBank and the Saudi Arabian govt sovereign wealth fund will create an investment fund with ample capital of around JPY10 tln (USD100bln). Will the US business overcome the wall of pressure to return to growth, or will the group not wait for growth and withdraw to explore other opportunities? A lot of attention will be paid to Son’s choice.