Sprint Chairman Vows ‘Price War’ If T-Mobile Deal Allowed
The billionaire, who bought control of the third-largest wireless carrier last year, said 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,” Son said in an interview with PBS’s Charlie Rose.
In a luncheon speech today at the Chamber of Commerce in Washington, Son said the U.S. lags in wireless Internet speed and its subscribers pay more than those in other countries. Son, who is the chairman of Sprint, said he also wants to upgrade infrastructure to provide for faster Internet access in the U.S. He is reframing his argument for consolidation in the U.S. mobile-phone market to advocate for wireless broadband as an alternative to cable.
“I’d like to provide an alternative,” Son said in the speech. While wireless broadband isn’t a competitor now with faster landline Internet services, such as cable, it might be with investment, Son said. Competition may bring a “real fight” to increase speed and lower prices, he said.
In the interview with Rose yesterday, Son, 56, said 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. He has met resistance to a T-Mobile deal from U.S. regulators 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 said during the interview with Rose, which aired nationally in the U.S. “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 during 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.”
SoftBank rose 2.6 percent to close at 8,178 yen in Tokyo trading. Sprint rose 0.8 percent to $8.78 in New York, while T-Mobile climbed 1.5 percent to $31.43. AT&T and Verizon each dropped less than 1 percent.
Shares of Deutsche Telekom AG, which owns about two-thirds of T-Mobile, increased 1.9 percent in German trading.
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, it had 25 percent of the market and 35 million users.
SoftBank outgrew both its rivals in new users every year from 2008 to 2013, and its market value has more than quadrupled to $94.2 billion since June 2008, when the company announced it would start offering the iPhone.
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 today.
“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.
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