Softbank (TSE: 9984) must feel confident enough in the strength of its 70% stake in Sprint (NYSE: S) by offering $20.1 Billion to eliminate any doubt of industry analysts that the deal is not solid. Both Sprint shareholders and the company are winners both in the short and long-term. On a larger note the deal reveals a mobile industry shake-up for AT&T (NYSE: T) and Verizon (NYSE: VZ). They now have a hefty competitor with capital infusion allowing the continuance of a 4G-LTE upgrade/build-out which could cause customer defections, especially from AT&T, historically known for lackluster customer service. See (Strategic Acquisition of Sprint by SoftBank)
The FCC is a winner with this announcement since its mandate to create more competition within the wireless industry and likely spur more innovation is realized. To me, this vindicates the regulator in nixing the AT&T-T-Mobile merger and plays smartly into more competitiveness with top U.S. mobile providers. Clearwire (NASDAQ: CLWR) is another beneficiary from the deal as it continues to upgrade its network to 4G-LTE taking the financial pressure off Sprint as its sole supporter.
U.S. consumers will be happy as more competition moves into the mobile market creating more reasons to switch to an alternative carrier as data caps infiltrate consumer bills more heavily on a day-to-day basis. Sprint currently offers no caps on data consumption which has been a big selling point of its services as a differentiator from rivals AT&T and Verizon. Not only will consumers benefit on price, but customer service will get a boost as well as a former duopoly is broken up.
Dan Hesse is a clear winner here solidifying his position as a market leader who has brought Sprint and Clearwire from the brink of being sold off for scrap. His vision to take a bold step to compete with AT&T and Verizon has proved incredibly gutsy and on target with the culmination of this deal. Undeniably, finding the right partner in Softbank was an indication of his ability as a CEO and a turn-around guru.
Masayoshi Son, the bold growth oriented CEO of Softbank wins for his vision to see the potential and synergies in a Sprint buy-out. Knowing that both companies have the same growth philosophies and huge market potential as long-term iPhone distributors, the Softbank CEO did not hesitate to grab up a company which has the potential to steal customers. Similarly, as Softbank did in Japan, Masayoshi made a calculated move to win away consumers from his competitors making strong in-roads to market dominance. The value of the Yen to Vs. US Dollar is another factor Son is taking advantage of in realizing a cheaper transaction price.
Inevitably, this is the free market system at work moving to create more innovation and competition in a fast growing market if the right conditions are present. The role of government in creating the right environment which fosters competitive forces cannot be understated. Allowing and disallowing mergers within the same industry is a balance of a light touch and strong convictions. The FCC has clearly created the optimum conditions for economic growth in analyzing the market, making corrections, and getting out-of-the-way.
If these same policies were implemented in wire-line broadband, the U.S. would soon enjoy more competition, faster speeds, and lower prices. This wireless market deal should be a model of how to implement government policies which foster growth in our economy. It takes forethought, perseverance and a strong vision to correct economic ills. It cannot be accomplished overnight, but should be a long-term strategy that understands the dynamics of market intervention when justified. My analysis of a SoftBank-Sprint deal indicates a shake-up in the wireless industry.
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