Billionaire Son Suffers Stumble as T-Mobile Pursuit Fails

Masayoshi Son’s inability to engineer a combination of his Sprint Corp. with T-Mobile US Inc. is a rare stumble for a dealmaker whose success made him Japan’s second-richest man.

Sprint, controlled by Son’s SoftBank Corp., ended talks with the fourth-largest U.S. carrier on regulatory concerns, a person with knowledge of the matter said. That leaves Son with Sprint, the No. 3 carrier in a market where it’s dwarfed by larger rivals and growing slower than T-Mobile.

Son used SoftBank as the linchpin of his international expansion, an empire that includes a stake in Alibaba Group Holding Ltd. that may be worth $64 billion and investments in more than 1,300 technology businesses. After promising a price war if his T-Mobile push succeeded, he now has to find a way to make his $22 billion bet on Sprint succeed without the quick benefits he expected from a deal.

“It’s not a fatal failure, although it’s a failure in that things didn’t go as SoftBank planned,” said Makoto Kikuchi, Tokyo-based chief executive officer for Myojo Asset Management Co. “Son isn’t patient. Son always wants to be bigger and isn’t content with the status quo.”

SoftBank shares have dropped 23 percent this year, compared with a 3.4 percent fall in the benchmark Topix index. Shares of Sprint, which is 80 percent owned by SoftBank, tumbled 19 percent to $5.90 in New York yesterday. The drop shaved $4.3 billion from the stake controlled by Son, according to data compiled by Bloomberg.

SuperCell Oy

In the past two years, SoftBank has announced 32 deals worth $51.3 billion, and only one of those has been terminated. The company in May canceled the proposed $3.2 billion sale of eAccess Ltd. to Yahoo Japan Corp., where Son also is chairman.

SoftBank has concentrated on acquisitions that provide content for his wireless operations, including adding control of Finnish gamemaker SuperCell Oy for $1.5 billion and taking a stake in Fitbit Inc., which makes wristbands that track exercise and sleep habits.

His success helped create a personal net worth of $14.4 billion, according to the Bloomberg Billionaires Index.

Son’s takeover of Sprint about a year ago was accompanied by a pledge to upgrade its network so the Overland Park, Kansas-based company could compete with Verizon Communications Inc. and AT&T Inc., the top two wireless carriers.

Sprint CEO

Since then, T-Mobile, which is controlled by Deutsche Telekom AG, has won customers with price cuts and phone financing offers.

That raised pressure on Sprint, which just posted its first quarterly profit in more than six years. In the June quarter, Sprint lost 245,000 monthly subscribers, while the other three carriers added users.

The campaign to gain T-Mobile and overcome antitrust concerns included Son’s appearance on U.S. network television, making public speeches and lobbying regulators to win support for the deal.

That was ultimately fruitless, as regulators remained skeptical that any potential benefits would be worth allowing the number of nationwide carriers to shrink below four.

“Son’s strategy in the U.S. is coming to a deadlock,” said Mitsushige Akino, Tokyo-based executive officer at Ichiyoshi Asset Management Co. “I’m not sure whether he can do business with Sprint alone. If Son doesn’t offer another strategy, the stock price will decline further.”

Alibaba Stake

Sprint’s next steps will be led by a new chief executive officer. The company named Marcelo Claure, founder of mobile-phone distributor Brightstar Corp., to replace Dan Hesse.

Claure, 43, was appointed less than a year after SoftBank agreed to buy a majority stake in his mobile-phone distributor for $1.26 billion as part of the Japanese carrier’s push for international expansion. SoftBank said yesterday it would buy the rest of Claure’s stake for about $298 million.

Over three decades, Son used borrowed money to transform the software wholesaler he founded in 1981 into a phone company spanning two continents. In Japan, he built a challenger to larger carriers and was first to bring Apple Inc.’s iPhone to the country.

SoftBank’s successes include the largest stake in Alibaba, an investment that started 14 years ago with a $20 million bet on a then-unknown Web portal connecting Chinese manufacturers with overseas buyers.

That site evolved into China’s biggest e-commerce operator and is valued at $187 billion, according to the average of analyst estimates. SoftBank owns more than 30 percent of Alibaba.

“What Son needs now is to rebuild SoftBank’s balance sheet to fight another day,” Amir Anvarzadeh, manager of Japanese equity sales at BGC Partners Inc. in Singapore, said in an e-mail.

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