What does Softbank’s history mean to Sprint’s future?

What does Softbank’s history mean to Sprint’s future?
Masayoshi Son, the head of Tokyo based Softbank, is not a normal businessman. While Dan Hesse will remain at the top of the Sprint component of Softbank’s operations, the business style of Mr. Son indicates there may be some very interesting changes in store not only for Sprint, but for the US mobile communications market.

Bear in mind that this deal is far from done, Sprint’s shareholders need to approve the deal, as do regulators, and AT&T has already crafted a carefully worded statement regarding the resulting control of spectrum by Sprint (and its control of Clearwire) and thus Softbank after the deal closes. Sprint was a vocal opponent to AT&T’s failed attempt to buy T-Mobile USA, so one might expect that turn-about is fair play. However, it is possible that AT&T is simply setting the stage for its own plans following this merger of East-meets-West, using it as justifications for gobbling up more spectrum down the road.

Even if the deal with Sprint and Softbank does go through, the reality will still be, in the immediate term, that AT&T and Verizon are the two giants, controlling more than two-thirds of the subscriber market and pretty much 100% of the profits. How does a company compete against that, especially if that company is Sprint, still smarting from the money poured in to Nextel, now going through a costly network conversion not just with Nextel, but also with Clearwire? Well, if Mr. Son’s activities with Softbank in Japan are any indication, it means a price war, and not just by a few dollars here or pennies there.

Without getting into the earliest depths of Son’s business acumen, put plainly, he knows how to make money. After graduating from the University of California at Berkeley, Mr. Son founded Softbank in 1981, which was then a software distributor. He was an early investor of Yahoo! and E-Trade and was later allowed to be a venture partner of the creation of Yahoo! Japan. After riding the dot-com bubble, and bust, Softbank turned to telecommunications, starting with broadband services. Those operations struggled for four-years while Mr. Son set-up meeting rooms in his apartment building to restructure the operation where it finally returned to profitability.

In 2006, Softbank leveraged itself the hilt to buy Vodafone Japan from its UK based parent. Vodafone Japan was in a similar state that Sprint finds itself today, a distant third place, up against two established and well managed competitors (NTT DoCoMo and KDDI) who had 80% of the market. Vodafone, now Softbank, cut the cost of its monthly service plans by 75% and launched a whole new series of marketing including a popular TV commercial series of a Japanese family with a talking white dog as the father (video below).

The result was Softbank adding more subscribers than its competitors quarter after quarter, and while still the number three carrier, it is not so distant. Mr. Son is known for monitoring real-time sales transactions and calling directly to locations that were not tracking their sales goals. As Softbank regained a more stable market share and began making a return on the investment, Mr. Son looked for this next challenge.

The United States, perhaps not surprisingly, has similar consumer trends to Japan when it comes to cell phone subscribers. Mr. Son is on the record stating, “I am a man, and every man wants to be number one.” Dan Hesse will remain the head of Sprint, but Mr. Son intends to be heavily involved in Sprint’s operations and decisions about price plans, devices offered and creative advertising. Could that mean that the US might get a taste of the exotic hardware usually reserved only for Japan? Probably not right away since Softbank is a UMTS/HSPA+ carrier and Sprint operates a CDMA network (and a WiMAX network, and an iDEN network), but both carriers are adopting LTE in future rollouts, so we will say, “Never say never.”

What is certain is that if Masayoshi Son is able to successfully implement his ideas with Sprint, then it will be impossible for AT&T and Verizon to not notice.

“I am betting $20 billion that I’m going to be successful.”

source: The Wall Street Journal


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