SoftBank’s Son Pitches New Option for Fast U.S. Internet
SoftBank Corp. (9984) President Masayoshi Son, drumming up support for the idea of merging his Sprint Corp. (S) with T-Mobile US Inc. (TMUS), said he can give U.S. Internet users a new option with lower prices and faster speeds.
“I’d like to provide an alternative,” Son said in a speech yesterday at the Chamber of Commerce in Washington. While wireless broadband isn’t a competitor now with faster landline Internet services, such as cable, it might be with investment, Son said. SoftBank shares fell in Tokyo trading.
The U.S. lags other industrialized countries in wireless Internet speed, and its subscribers pay more than those in other countries, said Son, who is the chairman of Sprint. After meeting resistance from regulators for a T-Mobile deal, the billionaire is reframing his argument for consolidation in the U.S. mobile-phone market to advocate for wireless broadband as an alternative to cable.
Son, who bought control of the third-largest wireless carrier last year, told PBS’s Charlie Rose that combining with fourth-ranked T-Mobile would give him scale to compete against AT&T Inc. (T) and Verizon Communications Inc. (VZ) Those operators collect most of the U.S. mobile industry’s cash flow and don’t face “real competition,” he said in an interview broadcast nationally the night before his Washington speech.
Son, 56, told Rose he was willing to postpone profit to gain market share and would use price cuts to draw users, a strategy used by SoftBank in Japan to create the nation’s fastest-growing operator. U.S. regulators have been skeptical that cutting the number of national wireless carriers to three would promote competition.
“We need a certain scale, but once we have enough scale to have a level fight, OK,” Son told Rose. “It’s a three-heavyweight fight. If I can have a real fight, I go in a more massive price war, a technology war.”
The U.S. has slower Internet services than Japan and South Korea, and ranked 15th out of 16 countries surveyed by speed, Son said in the interview.
“The mobile Internet, the Internet highway, is the most important infrastructure for the 21st century,” Son said during the interview. “We would like to make the deal happen.”
The U.S. has about 200 million mobile broadband users, the highest number of all countries, according to Chetan Sharma, an independent wireless analyst at Chetan Sharma Consulting. Last year, average mobile-data use almost doubled to 1.2 gigabytes from 690 megabytes, he said.
“Son explained why a T-Mobile bid is valid to regulators and showed that competition won’t disappear,” said Naoki Fujiwara, a Tokyo-based chief fund manager at Shinkin Asset Management Co. “He’s concerned an acquisition won’t be approved.”
When Son acquired Vodafone Group Plc’s Japan unit in April 2006, the struggling carrier faced two larger rivals. He changed pricing to revive growth and upgraded networks to send video and other data.
Within six months of completing the deal, he dropped the Vodafone brand in favor of the SoftBank label, a name then best-known in Japan as the nation’s second-largest Internet service provider.
He introduced the “White Plan,” which for the first time gave SoftBank users free calls to each other.
“What SoftBank did in Japan was to become focused on taking costs out of the business and challenging every line item,” Kirk Boodry, an analyst at New Street Research LLC in London, said March 7. “That gives them the flexibility to be more competitive on price and network.”
Son also made SoftBank the first Japanese carrier to offer Apple Inc.’s iPhone. The company tapped Hollywood stars to promote its brand, hiring actors Cameron Diaz, Brad Pitt and Tommy Lee Jones to spearhead advertising campaigns.
The moves helped. When Son bought the wireless business, it had about 15 percent of the market and 16 million subscribers. At the end of February, SoftBank’s mobile division had 35 million users. Combined with its Willcom and eMobile units, Son’s company has a total of about 45 million wireless subscribers, or about 30 percent of the market.
SoftBank outgrew both its rivals in new users every year from 2008 to 2013, and its market value has more than quadrupled to $92 billion since June 2008, when the company announced it would start offering the iPhone.
With Sprint, Son has acquired a network that has consistently lagged behind its larger competitors in quality studies. A report on network performance last week by RootMetrics.com gave Sprint a score of 68.2, trailing Verizon’s 89.7 and AT&T’s 86.2.
Sprint’s top network executive, Steve Elfman, is retiring early next year, the company said today in a filing. Chief Financial Officer Joe Euteneuer said this week that the retirement has long been planned and that Elfman is working to ensure a smooth transition.
Son is attempting to change the public perception of a potential deal for T-Mobile, said Makoto Kikuchi, Tokyo-based chief executive officer for Myojo Asset Management Co. Consumers would welcome more price competition, he said.
“It would be a huge success for SoftBank if they use a price war as their strategy and then revive Sprint and T-Mobile,” Kikuchi said.