Softbank Splits into Two Companies to Manage Sprint’s Debt Load

by Matt Klassen on March 8, 2016

IT11-S-030816-APJapanese telecom giant Softbank, the majority stakeholder in Sprint, has announced its intention to split itself into two separate entities in an attempt to shelter its more profitable Japanese ventures from its debt-laden international impulse purchases. While there is no official word yet on how the restructuring will affect Softbank’s debt load, given that Sprint is a deadweight pulling the company to the bottom of the sea, it is abundantly clear that the telecom giant is looking to hedge its other assets from such a black hole.

But that’s not to say that Softbank is giving up on Sprint (although who knows if this is a ploy to make certain assets more attractive to potential suitors), as earlier this month a Bloomberg report noted that Sprint’s parent company was looking to create yet another subsidiary that would infuse Sprint with a multi-billion dollar loan to help further finance its ongoing network development and costly promotional offerings.

Of course none of this does anything to change the fact that Sprint is haemorrhaging money and fading quickly in the American wireless market, it simply allows parent company Softbank to mitigate the damage when America’s fourth largest provider inevitably implodes.

Whether or not children play any role in creating certain marital tensions, couples going through divorce usually go out of their way to assure children that they remain blameless in the split. But in Sprint’s case the harsh reality is that, as the subsidiary, Sprint carries much of the blame for initiating this split, as Softbank looks to find ways to hedge its valuable domestic Japanese telecom assets from its less-than-stellar international investments.

As USA Today’s Kaja Whitehouse explains, “The reorganization will separate Softbank’s overseas assets, including its stakes in Sprint and Chinese Internet company Alibaba, into a company apart from its Japanese assets, which include its domestic mobile business and Internet company Yahoo Japan.”

According to reports, Nikesh Arora, Softbank Group president, will oversee the new unnamed international operations entity, while domestic operations will be led by Ken Mayauchi, who, together with Arora, currently serves as president, chief operation office and director of Softbank.  Both companies will remain under the control of Softbank founder Masayoshi Son.

While such corporate musical chairs are really nothing new, this does strike me as disconcerting news for Sprint, for although on the face of it this shuffle seems to be about debt management, by grouping Sprint in a new Softbank spinoff it could make divesting the struggling American telecom company that much easier. Truth be told, given Sprint’s poor performance under Softbank’s control, I would be more surprised if Masayoshi Son chose to keep Sprint then I would be if he decided to cut it loose.

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

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