announced a deal that will have Softbank acquiring 70% of Sprint for around $20 billion. Dan Hesse will remain as Sprint's CEO. But with a controlling interest, Softbank will be calling the shots at Sprint.
Image: Softbank and Sprint CEOs Masayoshi Son and Dan Hesse shake on the deal.
Softbank's CEO Masayoshi Son is known as a risk taking deal maker with a history of turning weak companies around. There's some speculation that acquiring Sprint is only the first part of a plan by Son to eventually combine Sprint, Clearwire, MetroPCS and possibly T-Mobile into a mobile mega-operator that could be as large as AT&T or Verizon.
Financial analysts are saying that the deal is a good for one Sprint because it will reduce the company's massive $14 billion debt and give it the funds it needs to improve its overloaded network.
But will the deal be good for consumers, including prepaid customers? That's hard to say. Certainly a stronger, faster network is a good thing. The cash infusion from Softbank will help Sprint acquire new equipment and more spectrum to improve its network. Softbank/Sprint is expected to purchase the 52% of Clearwire that it doesn't already own. Clearwire holds a massive amount of nation-wide spectrum and buying it would nearly quadruple Sprint's current spectrum holdings and actually give it more spectrum than either Verizon or AT&T.
But what about phone and plan pricing? In 2006 Softbank got into the mobile business by purchasing Vodafone Japan for $15.5 billion. Vodafone was a distant third in the Japanese market and had been losing market share for years. Softbank invested heavily in network infrastructure, launched an iconic ad campaign, cut plan prices and refreshed Vodafone's boring handset portfolio with trendy models including the iPhone. Within months, Softbank mobile became the fastest growing mobile operator in Japan and recently became the second largest Japanese operator in revenue.
Will Softbank be able to revitalize Sprint the way they did Vodafone Japan? I hope they do and expect a similar approach of network enhancements, an advertising blitz and innovative new phones. However I wouldn't count on seeing cheaper plans. Softbank, is borrowing heavily to do the the Sprint deal. The interest payments combined with the costs of acquiring Clearwire and upgrading the network won't leave Softbank with much room to compete on price.
The Softbank, Sprint deal must be approved by shareholders and regulators. Approval is expected and the deal should close within six months. Don't expect any big changes in Sprint's offerings until then.