Son’s Challenge to Cable Won’t End T-Mobile Deal Scrutiny

Billionaire Masayoshi Son says his wireless Internet service can challenge U.S. cable companies with lower prices and increased speeds. The pitch probably won’t quiet regulators’ qualms about his plan to buy T-Mobile US Inc. (TMUS)

Son, the president of Japan’s SoftBank Corp. (9984), told an audience in Washington yesterday that he wants to invest in high-speed mobile broadband service to compete against companies such as Comcast Corp. (CMCSA) and Verizon Communications Inc. that offer fast Web access over wires.

After buying control of third-largest U.S. wireless provider Sprint Corp. (S) last year, Son wants to acquire T-Mobile, the fourth-largest. Even if the merger sparks competition with cable, the elimination of one of four major wireless carriers won’t be overlooked by antitrust regulators, said Maurice Stucke, a law professor at the University of Tennessee.

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“He has to overcome the presumption that this merger is anticompetitive,” said Stucke, a former Justice Department lawyer. “You can’t argue we should allow this market to be more concentrated in order to better compete in a separate market.”

Son didn’t mention a possible merger during his remarks. Asked afterward by reporters about T-Mobile, based in Bellevue, Washington, he said he wouldn’t discuss specific companies. Son said he isn’t seeing U.S. officials on his Washington visit.

Photographer: Andrew Harrer/Bloomberg

SoftBank Corp. Chairman, President and Chief Executive Officer Masayoshi Son. Close

SoftBank Corp. Chairman, President and Chief Executive Officer Masayoshi Son.

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Photographer: Andrew Harrer/Bloomberg

SoftBank Corp. Chairman, President and Chief Executive Officer Masayoshi Son.

“Not this trip but whenever we have the opportunity sometime in the future, that is I think necessary,” Son said.

Alternative Internet

SoftBank hired Bruce Gottlieb as an executive vice president for legal and regulatory affairs in Washington, the company said in a statement yesterday. Gottlieb was previously chief counsel of the Federal Communications Commission.

Mitsuhiro Kurano, a Tokyo-based spokesman for SoftBank, said the company has no comment beyond Son’s speech.

Son is positioning a bigger wireless broadband provider as an alternative for American consumers who today only have two major choices for Internet at home: their landline phone company, such as New York-based Verizon, or a cable-TV company, like Comcast, based in Philadelphia.

“I’d like to provide an alternative” to slow and expensive U.S. Internet service, Son said in his remarks at the U.S. Chamber of Commerce, across a park from the White House. Son stood before a video screen that bore bar charts, images and messages including: “Change the U.S. wireless status quo.”

Slow Speeds

The U.S. has slower Internet services than Japan and South Korea, and ranked 15th out of 16 countries surveyed by speed, Son said. Japan came in 14th, and was the most improved for higher speeds, according to the survey.

SoftBank fell 3.9 percent to close at 7,862 yen at the close of trade in Tokyo, the biggest drop since Feb. 3. The Topix index lost 2.1 percent. Sprint rose 1 cent, or 0.1 percent, to $8.79 at 1:14 p.m. in New York. T-Mobile rose 17 cents, or 0.5 percent, to $31.60.

Wireless isn’t a competitor now with faster, wired Internet services. It could be with investment, Son said.

“Yes we can,” Son said. “Yes we can.”

Son’s presentation “was very well crafted for a Washington audience, but it won’t be easy to move regulators off their clear skepticism of a merger” of Sprint and T-Mobile, Paul Gallant, Washington-based managing director for Guggenheim Securities, said in an interview.

‘Real World’

It’s not clear that Sprint, of Overland Park, Kansas, needs to buy T-Mobile to shake up the market in the “very appealing ways” Son described, John Bergmayer, senior staff attorney with the Washington-based policy group Public Knowledge, said in an e-mail.

Wireless service isn’t robust enough to serve as a competitive substitute for fast wired Internet service, Bergmayer said.

“Before we start treating wireline and wireless as competitors and allowing various mergers to skate through as a consequence, I want to see it in the real world,” Bergmayer said.

Son and Sprint Chief Executive Officer Dan Hesse got a “highly skeptical” response when they raised the possible T-Mobile deal with FCC Chairman Tom Wheeler in February, 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.

Comcast Comparison

Comcast, the nation’s largest cable provider, is using some of the same arguments in trying to convince regulators to approve its $45.2 billion bid for Time Warner Cable Inc., of New York. Company officials have said cable’s real competitors in broadband Internet service are the dominant two phone providers, Verizon and AT&T.

The big difference to regulators may be that cable companies have franchise rights in different markets and Comcast and Time Warner Cable don’t compete for customers now.

Wireless companies, such as Sprint and T-Mobile, are direct competitors.

In January, Bill Baer, the head of the Justice Department’s antitrust division, which would review any deal for T-Mobile, credited the smaller carrier for spurring competition against rivals after the U.S. blocked its takeover by Dallas-based AT&T, the nation’s No. 2 wireless provider, in 2011.

Reversing regulators’ opposition to a Sprint deal for T-Mobile would be “extraordinarily difficult,” Craig Moffett, a New York-based analyst with MoffettNathanson Research, said in a note.

“We remain skeptical that SoftBank will succeed in re-defining the market as something other than ‘wireless,’ or, at least, to the exclusion of a market definition that still includes traditional wireless,” Moffett said.

To contact the reporters on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net; Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net Elizabeth Wasserman

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