In SoftBank Corp. (9984) billionaire Masayoshi Son, U.S. regulators are sampling the resolve of a self-made tycoon who once threatened to set himself afire at a Japanese government ministry.
After meeting with Son, regulators have said they’re skeptical about his Sprint Corp. (S) buying No. 4 U.S. mobile provider T-Mobile US Inc. (TMUS), not wanting to see the number of national wireless carriers shrink to three.
Still, Son is pushing ahead. He will meet with officials at Sprint and T-Mobile’s partner, Deutsche Telekom AG (DTE), in coming weeks, a person familiar with his thinking said yesterday. Sprint Chief Executive Officer Dan Hesse in an interview yesterday called the plan “logical.”
Son today used SoftBank’s quarterly earnings to explain why he wants to build up Sprint, the third-largest U.S. wireless carrier. He declined to comment on what he termed “various rumors” about T-Mobile.
“Without industry consolidation, for Sprint alone to become No. 1 in the U.S. is literally just a dream,” Son said. “I’m not content for Sprint to remain No. 3 because if we could grow bigger, we will offer aggressive discounts and services, just like we did in Japan.”
For Son, pushing the boundaries is characteristic. He tells employees to think until their “brains crush.” He has a 300-year growth plan.
“He has a strong and determined personality and has been very successful not taking ‘no’ for an answer,” said Parissa Haghirian, associate professor at Sophia University in Tokyo and author of “Understanding Japanese Management Practices,” in an e-mail.
Son, 56, and Hesse received little encouragement in meetings with regulators, according to officials briefed on the conversations. The executives press on, with Hesse and Son appearing at an event last week with President Barack Obama to promote investment in broadband for schools and Sprint donating air time for students.
“I don’t want to speculate on whether it’s inevitable,” Hesse said when asked about a possible deal. “I think it’s logical, and that it would be positive for the industry.”
Whether Son moves ahead may not be clear for weeks. He had expected his comments on Sprint and T-Mobile’s relative weakness to its larger rivals would be more persuasive to regulators, a person familiar with the talks said.
Sprint may be also making its case tougher. The company’s sales beat analysts’ expectations when it announced earnings yesterday, and a “bullish outlook” undermines Son’s case that smaller players need to combine to take on market leaders Verizon Wireless and AT&T Inc. (T), Kevin Roe, an analyst with Roe Equity Research, based in Dorset, Vermont, said in an e-mail.
“Sprint will get it right and ultimately be in a position to challenge AT&T, Verizon and T-Mobile,” Roe said in an earlier e-mail. “SoftBank does not need T-Mobile to achieve a Sprint turnaround.”
Son, who rose from scorned minority schoolboy to world’s 46th-richest person as of yesterday, became chairman of Sprint after spending $21.6 billion to buy control last year.
He’s seeking overseas opportunities as there isn’t enough potential for significant growth in Japan, where SoftBank has narrowed the gap with NTT Docomo Inc. (9437) and KDDI Corp. (9433) in wireless subscribers.
Son’s courting of Washington before a deal has been reached is turning inside out the usual ritual of companies making the rounds with an agreement in hand.
“It’s pretty unusual for a CEO to discuss a merger directly with regulators before a deal is announced,” said Paul Gallant, Washington-based managing director for Guggenheim Securities, in an interview. “It’s particularly curious that SoftBank still appears interested in moving forward despite negative signals.”
So far, official Washington isn’t buying Son’s plan.
The U.S. deal would eliminate T-Mobile as an independent actor -- a potential deal-stopper for U.S. regulators who say they don’t want to see fewer than four national wireless competitors.
Son and Hesse got a “highly skeptical” response when they raised the possible deal with FCC Chairman Tom Wheeler on Feb. 3, and resistance in an earlier meeting at the Justice Department, said people briefed on the meetings who asked not to be named because the sessions were private.
Assistant Attorney General Bill Baer, the top U.S. antitrust official, on Jan. 30 said T-Mobile has “spearheaded increased competition” that is “driving enormous benefits in the direction of the American consumer.”
The Justice Department sued in 2011 to keep AT&T from swallowing T-Mobile, saying in a court filing a purchase by the second-biggest U.S. mobile provider “would remove a significant competitive force from the market.”
Sprint argues Verizon Wireless and AT&T still dominate the market and that a deal with T-Mobile would create a stronger third competitor, according to people familiar with the company’s lobbying.
Son’s push to convince regulators on the merits of a deal has even been met with reluctance inside Sprint, said a person familiar with the matter who wasn’t authorized to discuss the executives’ interaction.
Sprint executives have told Son since late last year that regulators prefer a marketplace with four national providers, said this person.
Son’s campaign, whether intentionally public or not, stands in contrast to AT&T’s bid three years ago for T-Mobile. AT&T, a leader in lobbying spending, didn’t seek advice beforehand from the Justice Department and FCC. Notice came via a volley of morning telephone calls to regulators the day the deal was announced.
“They’re not going to give you a pre-judgment opinion,” AT&T General Counsel D. Wayne Watts said at the time. The announcement kicked off a nine-month lobbying brawl that ended with AT&T withdrawing its bid.
Sprint, with lobbying expenditures last year of less than one-fifth the level of AT&T’s, has embraced a different strategy.
“From the point of view of many people involved there’s a lot to be gained by giving it the old college try,” Bert Foer, president of the American Antitrust Institute, a Washington-based nonprofit group, said in an interview. “Maybe in the end it will fail, but it will generate a lot of fees in the meantime.”
Son was born to a Korean immigrant family in Tosu, Japan, and recalls beingpelted with stones as a schoolboy, according to a biography. He founded SoftBank in 1981 as a wholesaler of packaged computer software. His ambition is to grow it to rank among the world’s 10 largest companies by 2040 and to continue growing for 300 years, according to a corporate document.
Company values include “commit to be an overwhelming No. 1” and “think till our brains crush,” according to a version posted on SoftBank’s website.
Explaining his investment in mobile phones, Son in 2006 told reporters, “I don’t intend to stay No. 3 forever.”
As for the self-immolation threat: Son got what he wanted as the ministry ordered rivals to connect to his network, sparking competition, according to a 2004 article in Businessweek magazine.
Word of the stunt circulated for years, Gerhard Fasol, president of Tokyo-based consultancy Eurotechnology Japan, said in a 2013 blog posting.
“These rumors are true, however I did not take any petrol along with me inside the ministry,” Son said, according to Fasol’s account.
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