A billionaire's ego and his bad decisions led to Sprint's downfall

A billionaire's ego and his bad decisions led to Sprint's downfall
Now that Sprint will soon become part of the New T-Mobile, the question is how did it get here? After all, back in 2014 when Sprint and T-Mobile approached the FCC and the Department of Justice (DOJ) about a merger, things were much different. Back then, it was Sprint dealing from a position of strength while T-Mobile was less than two years into the reign of CEO John Legere. But we are getting ahead of ourselves because, on October 15th, 2012 Japan's SoftBank offered to buy more than 70% of Sprint for $20 billion.

But one executive was not going to let Sprint slip through his fingers. Dish Network co-founder and Chairman Charles Ergen wanted to add a wireless provider to his satellite television business and Sprint was right there for the taking. So Dish became involved in the transaction and at one point Ergen announced that he would pay $25 billion for all of Sprint. But some believed that the executive was not serious about injecting himself into the deal; the company didn't appear to arrange financing for the offer and in July 2013, SoftBank ended up agreeing to pay $21.6 billion for 78% of Sprint.

And this is where our story truly begins as a report in the New York Post blames Sprint's downfall on SoftBank founder and CEO Masayoshi Son. Since the billionaire took over Sprint in 2014 when the deal closed, the carrier has laid off 10,000 employees and has hopelessly fallen way behind its rivals in terms of service. By August 2015, Sprint and T-Mobile swapped their positions among the U.S. majors with the latter becoming the third-largest wireless operator in the states.

Sprint's decision not to build traditional cell towers was a "total failure" said former CEO Claure

According to the Post, no sooner had the ink dried on the merger agreement between SoftBank and Sprint then Son wanted to merge his new business with T-Mobile. While Sprint executives thought that buying T-Mobile made sense, they advised Son that it was not the right time to go after T-Mobile. But billionaires will be billionaires. Both carriers approached the FCC and DOJ and were told (not in these precise terms) that there wasn't a snowball's chance in hell that the merger would receive regulatory approval. Just three years earlier, the DOJ had blown up AT&T's $39 billion purchase of T-Mobile which would have created the nation's largest carrier at the time.

One former top executive at Sprint explained that "Our government affairs team made it very clear at the time it was the wrong move. It never occurred to us that he (Son) would not listen." And while T-Mobile parent Deutsche Telecom said that it would be amenable to a deal, it also agreed that the time was not right to seek regulatory approval. So Sprint's executive team came up with a plan to court then-FCC Chairman Tom Wheeler. The plan was to slowly get him, perhaps over the course of a year, to see the wisdom of combining the two carriers. Then, and only then, would the FCC be approached about a merger.

But Son didn"t want to wait and arranged a meeting with Wheeler. Sprint executives were nervous because they had seen how Son had acted with FCC Chairman Julius Genachowski (who preceded Wheeler) while discussing SoftBank's proposed purchase of Sprint. According to one person who has direct knowledge of what occurred, "(Son) had a caravan of five or six black SUVs that drove to the FCC meeting. They blow past the FCC security and park in Genachowski’s private driveway. They all pile out and go into the lobby. He was basically saying your rules are stupid." The FCC approved the merger nonetheless and Genachowski is now a member of Sprint's board.

Son said that he was ready to give up on Sprint back in 2014

In December 2013, Son met with the FCC to discuss a possible Sprint-T-Mobile merger. That morning, a leak in the Wall Street Journal about a possible merger between Sprint and T-Mobile had the FCC thinking that Son had whispered the story to the paper hoping to apply pressure to the regulatory agency. FCC Chairman Wheeler reportedly told the billionaire that the agency had just done all of the analytical work on the blocked AT&T-T-Mobile merger and that unless things had changed since, the FCC could not approve the transaction. Son responded by arguing with Wheeler and as one source said, "You could see Masa digging himself into a hole. It was not well played." One source says that had Sprint waited a year to approach regulators, the deal would have been approved.

When SoftBank purchased Sprint, it also acquired Clearwire. According to New Street Research analyst Jonathan Chaplin, the telecom company owned some of the technology behind 5G and enough spectrum to help Sprint eventually build a nationwide 5G network. All it needed was an investment of $25 billion to $30 billion, the analyst said. But instead of constructing cell towers, Son decided to implement a plan that had worked for SoftBank in Japan. For a fraction of the cost needed to build the towers, Sprint sought permission from cities and towns to put its networking equipment on the top of existing structures like light towers.

Former Sprint CEO and current executive chairman Marcelo Claure stated, "It was a 180-degree change. All of a sudden, we [in 2014] start on this tower and light thing...Unfortunately, I would say that it was a total failure." He also compared Sprint's poor service with its rivals. "The quality of our network was four times worse than Verizon, half of T-Mobile and a little less than half of AT&T," he said.

During an interview with the Wall Street Journal in 2015, Son admitted that he was ready to give up on Sprint in 2014. But inside, he knew that he could not do that. "We still have the customers, we still have employees, so I have to take care," the billionaire explained.



12. smallworld

Posts: 536; Member since: Jul 13, 2012

"And while T-Mobile parent Deutsche Bank said that it would be amenable to a deal" You mean Deutsche Telekom

14. Alan01

Posts: 670; Member since: Mar 21, 2012

Yes I do, although it is possible that Deutsche Telecom banks at Deutsche Bank. If so, they probably have a ton of toasters! Thanks. Alan

15. smallworld

Posts: 536; Member since: Jul 13, 2012

You corrected with Telecom instead of Telekom. Damn Germans!

11. manzer

Posts: 65; Member since: Apr 05, 2014

Just a thought, but what if it was in the plans to let Sprint slip a little to make the merger happen. What if a strong Sprint and a strong T-mobile couldn't merge or be alowwed to. So goes the saying, 'you're being played son'.

7. CTHR100

Posts: 36; Member since: May 12, 2017

The downfall of Sprint wasn't due to just SoftBank. They were riding the struggle bus long before SoftBank. SoftBank extended the misery.

8. matistight

Posts: 1066; Member since: May 13, 2009

The downfall started when they were created lol, but it technically started when they killed Nextel

16. CTHR100

Posts: 36; Member since: May 12, 2017

Killing Nextel really wasn't a bad idea. However not integrating what people loved about Nextel and not charging for it, that was a bad idea

17. Borged

Posts: 6; Member since: Feb 15, 2020

The first nail in the coffin was not merging with Alltel when Alltel approached them. A completely complementary network instead of one with no upgrade path.

6. Dr.Phil

Posts: 2578; Member since: Feb 14, 2011

I’m interested to see if Dish really does something with Boost. I think there is definitely room for a satellite powered cell company that also uses traditional cell towers. As far as Sprint is concerned, I don’t think I can blame SoftBank for all the problems. There was nobody that was genuinely interested in helping Sprint. Dish was throwing in half serious offers. Nobody wanted to touch it with a ten foot pole. All the major carriers were avoiding it because they knew if Sprint kept around a little longer it would go bankrupt and they would gobble up the remains.

4. haydenb

Posts: 146; Member since: Nov 24, 2011

Sprints failure really started when they decided on WiMAX not LTE like everyone else did. So That put them a step behind from the start. Sprint would have been better off if Softbank had never bought them

13. cogito

Posts: 78; Member since: Aug 18, 2015

Sprint’s failure probably started way before that when they switched from GSM to CDMA.

2. CellieCell

Posts: 156; Member since: Apr 14, 2010

I still feel that sprints total failure really started with WiMAX. If they had just stuck with LTE like every other cellular company. I remember how WiMAX was, and it was not impressive. Especially the roll out. In the beginning I was really against Sprint and T-Mobile merger, but now with the mid band 5g, that's where the money's at, so hopefully everything comes together.

9. ECPirate37

Posts: 359; Member since: Jul 14, 2011

I actually liked WiMax a lot at the time. I lived in NYC and my WiMax was faster than my friend's LTE. The issue is, one had to root their phone and delete the "Smith" file. Smith regulated the speed on the phone, and would throttle it. Once I deleted that, I was regularly getting great speeds. However, I can't say that it worked well everywhere. To your point though, Spring probably would have been way better off just waiting and doing LTE, but I believe I read that they HAD to use the spectrum for something or they would lose it, and WiMax was the only thing available. Maybe someone else can source that for me.

1. Eclectech

Posts: 364; Member since: May 01, 2013

What a jerk. Sprint would be so much better off had SoftBank never bought them. As soon as Dan Hesse left the building, Sprint began spiraling downward.

3. cevon3239

Posts: 234; Member since: Jan 01, 2020

Dan Hesse was so cool. I agree with you 100%. He actually started turning Sprint around.

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