SoftBank’s Son: ‘Big Mouth’ Ergen Wrong Fit for Sprint
SoftBank Corp. (9984) President Masayoshi Son lashed out at fellow billionaire Charlie Ergen, saying he doesn’t have the expertise to run Sprint Nextel Corp. (S), the U.S. mobile-phone company both men are trying to take over.
Ergen, the chairman of Dish Network Corp. (DISH), doesn’t have a wireless background, making him a poor fit to run Sprint, Son said yesterday in an event in Tokyo. He questioned the wisdom of Ergen’s strategy to combine Sprint with a satellite-television company instead of another mobile-phone carrier like his own.
“I just deliver the results, instead of big-mouthing about the future,” Son said. “Do you want to attach a satellite dish to your smartphone? It’s going to become much heavier. I don’t see any real meaningful value that he can offer to the smartphone customers.”
With the volley against Ergen, Son sought to cast doubt on Dish’s $25.5 billion offer to acquire Sprint, a proposal that investors such as Omega Advisors Inc. have called superior to SoftBank’s $20 billion bid. Sprint may be able to turn a profit starting next year if shareholders accept SoftBank’s offer, Son said.
“Starting in the second half of this year when our deal is closed, it will start showing early symptoms” of a turn toward profit, he said. “And by next year it will start having a real benefit of turning around. Net income will probably start being positive very soon.”
Dish, based in Englewood, Colorado, continues to believe its offer is better than SoftBank’s, it said yesterday in a statement.
“We remain confident that the Sprint board will share our view that the Dish proposal is superior by offering Sprint shareholders greater value with a higher price and more cash,” Dish said. “A combined Dish/Sprint will benefit from synergies and growth opportunities that are not attainable through the pending SoftBank proposal.”
Sprint, based in Overland Park, Kansas, fell 1 percent to $7.05 yesterday in New York. Dish dropped 3.4 percent to $39.19. SoftBank rose 1.2 percent to 4,825 yen yesterday in Tokyo.
In the SoftBank deal, Sprint would be fully profitable by 2015, in part because of $2 billion in annual savings as the two companies pool their phone and network-equipment purchasing to buy in bulk, Son said yesterday in an interview after the presentation. The companies will together have a $20 billion budget for devices and network parts, he said.
SoftBank has more experience in wireless phone networks than Dish, which gets most of its sales from satellite broadcasting, with the Japanese company’s offer giving the U.S. carrier more buying power and less debt to repay than Dish’s $25.5 billion proposal, Son said.
“People ask me, ‘Will SoftBank be increasing the price for the offer?’ Why should we?” Son told reporters at the event in Tokyo yesterday. “We are already providing a better deal than the Dish proposal.”
In an hourlong presentation, he returned repeatedly to what he called Ergen’s shortcomings, saying the Dish chairman was not “behaving himself.” He criticized Ergen for making an unsolicited offer, while SoftBank worked with Sprint management to develop a proposal. He noted that Dish is less profitable than its U.S. satellite competitor, DirecTV. And he said the Dish offer for Sprint would give Ergen too much control of the combined company.
“Many people tell me Masa Son is a one-man-show company, but I’m not that much aggressive to give 85 percent voting power to myself,” he said. “I am behaving a little bit better.”
SoftBank’s bid for Sprint includes paying $12.1 billion to the U.S. company’s shareholders and $8 billion of new capital for a 70 percent stake, the companies said in an Oct. 15 statement.
Son said SoftBank’s offer is worth $7.65 a share for Sprint after including the elimination of redundant parts of the businesses, compared with $6.31 for the Dish proposal, including the time delays and costs of Ergen’s offer.
Sprint has to pay SoftBank $600 million if it recommends a rival offer to shareholders, according to terms of the deal. The Japanese company in October closed the purchase of $3.1 billion of convertible bonds that can be exchanged for more than 590 million Sprint shares.
Some Sprint shareholders, including Omega Advisors and billionaire John Paulson, said they preferred Dish’s offer.
Sprint has tentatively set June 12 as the date for a shareholder vote on SoftBank’s offer, the U.S. wireless company said last week.
Raising the bid would make Son’s ambition to expand into the U.S. cost more, while the company’s credit ratings are already under review for a possible cut to junk.
Standard & Poor’s and Moody’s Investors Service Inc. have put the Japanese company’s credit ratings under review for possible downgrade on concern the Sprint acquisition may undermine its financial strength. A downgrade of one step would bring the rating to a speculative, or junk, ranking at Moody’s.
Son, Japan’s second-richest man, said in October he targeted Sprint because it can challenge Verizon Wireless and AT&T Inc.’s dominance of the U.S. mobile-phone industry.
The 55-year-old’s stated goal is to create the largest mobile-services provider in the world by revenue, surpassing Verizon, Vodafone Group Plc (VOD) and China Mobile Ltd (941). His strategy would ultimately benefit investors more than what Ergen can offer them, he said.
“He himself admits he’s an amateur to our mobile industry,” Son said at the Tokyo event. “He does not have any history in our industry. So he’s a newcomer -- totally, totally a newcomer.”
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