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SoftBank Sprint Stops T-Mobile Bid To Focus On Core Business

by Richard Guppy | Aug 06, 2014

So Mr Son of SoftBank has decided to walk away from negotiations to buy T-Mobile USA thanks to continuing regulatory opposition, according to the Wall Street Journal, and has replaced Sprint’s CEO, Dan Hesse.  This comes days after T-Mobile rejected a bid by French telecoms challenger Iliad.  What next?

Having just completed a refresh of the SCI-m Dossier on Orange, and reminded myself of the huge impact that Iliad has had on the former state monopoly telecoms operator Orange, I can’t help thinking that the US mobile and fixed telecoms industry might have been more stable if Sprint and T-Mobile had been allowed to merge.  Now, Iliad might increase its offer for T-Mobile; and if that happened and was accepted, watch out: MAJOR disruption would then be heading towards the US market.

An experienced colleague in SA observed this morning that Mr Son is a seasoned negotiator, and might come back to T-Mobile in the near or long term future.  If the regulatory conditions relax, he might renew his offer.  So that story may not be quite over yet.

I have to admire Mr Son.  All his experience as an entrepreneur, buying and selling hundreds of companies along the way, made him realistically view the chances of success for the T-Mobile bid.  A man of action, he concluded he could spend his time and money in better ways, and called a halt.  Contrast that with the prolonged time when AT&T and T-Mobile were trying to merge, creating lengthy distractions for the two companies and ending with a large break-up fee.

Now, Mr Son can get on with the business of growing Sprint organically.  He has removed the CEO, in spite of a long personal relationship in business between the two, and installed another entrepreneur, Marcelo Claure.  The move sends the clearest possible signal that Mr Son was serious when he said in recent months that he was unhappy with the progress Sprint was making and that it had a ‘loser’s mentality’ – and that he needs change.  Changing the man at the top is a key first step to changing the rest of the organization.

Sprint has had some difficult times recently while it changes out its fragmented 2G-3G-4G infrastructure for a unified 4G system with lots of spectrum at its disposal, leading in future to so-called carrier aggregation with double and triple 4G download speeds.  That process is nearing completion, and Sprint will then be able to focus on marketing rather than building networks.

Add to this mix that Mr Son has just hired Nikesh Arora from Google to head up SoftBank’s new Internet business, and Sprint remains an interesting company to watch in the USA – Mr Arora might bring entirely new ways of doing business to SoftBank and Sprint.  I believe that SCI-m’s Disruptive Alert on SoftBank remains valid.  It’s just that SoftBank may not be as disruptive in the USA as Iliad might be.

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