Softbank Wins the Sprint Sweepstakes

by Matt Klassen on June 26, 2013

The votes are in, the die is cast, and Japanese mobile giant Softbank is the winner of the Sprint sweepstakes. The oft-delayed shareholder vote was finally held on Tuesday, with an overwhelming majority (98 percent) voting in favour of the Softbank bid, the penultimate step in ending this soap opera-like drama. The deal must still get the stamp of approval from the Federal Communications Commission, but given all the bureaucratic hoops Softbank has already jumped through, that seems (as any FCC involvement often does) to be nothing but a formality.

“Today is a historic day for our company, and I want to thank our shareholders for approving this transformative merger agreement,” Sprint CEO Dan Hesse said in a statement. “The transaction with Softbank should enhance Sprint’s long-term value and competitive position by creating a company with greater financial flexibility.”

Although there was a concerted push from some investors to pursue the offer from rival suitor Dish Network, the satellite TV provider withdrew its bid last week, choosing to focus instead on its attempted acquisition of Clearwire and paving the way for Softbank.

After several weeks of suspense, much of it due to Dish Network’s dark horse bid for Sprint, the saga is finally reaching a conclusion, the latter’s shareholders accepting Softbank’s improved $21.6 billion bid. With only the FCC left to approve the deal, Softbank is confident everything will be wrapped up by July.

But following this epic battle for Sprint, one has to wonder if Softbank knows just what it has got itself into, as life in the American wireless market makes this battle with Dish Network seem like a hippie love-in. “Developing networks in the U.S. is difficult, requiring huge areas to be covered and upgraded unlike the more densely populated Japan”, an article from the Wall Street Journal notes, but Softbank CEO Masayoshi Son is optimistic this new partnership can shift the balance of power.

In an industry dominated by a duopoly, the incumbents have no motivation to bring “severe competition” in pricing or services, but add a third player in that market and suddenly everything is different. “That will stimulate the whole industry in terms of both innovation, the prices, services, everything,” Son said.

The further challenge for Son and his Japanese Softbank group is that differences in network capabilities between American and Japan. According to data from Cisco Visual Networking Index, the average smartphone connection speed in Japan was 2.1 megabytes per second, demonstrably better than the average 1.5 megabytes per second in the U.S. “Right now, every time I come to the States, I say ‘Wow! This is so slow, what is this? It’s unbearable,'” Son said in October when his company first announced its initial agreement with Sprint.

But this challenge is a welcome one for Softbank, with a huge upside for consumers, as Son has said he plans to recreate his success in Japan by building a network that supports what he says is the “world’s fastest and smoothest” Internet connectivity.

In the end, while some may decry the entrance of yet another foreign investor in an American market, if Softbank is able to adjust to life in the American wireless market, it will almost certainly be of great benefit to all, as not only will Sprint improve its nationwide wireless network, but it will force the other players to do likewise.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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