Softbank has announced its purchase of Sprint, in a deal valued at $20 billion. This cash infusion will give Sprint a much-needed boost, ensuring that the company can continue with its current LTE network roll-out, which is key to the long-term success of the carrier.
But beyond the cash infusion, the benefits of the deal are a little more of a head-scratcher, with little-to-no synergies between Softbank and Sprint. Having said that, industry speculation has circulated around two potential benefits of the deal, namely the ability for Sprint to now acquire T-Mobile and leverage Japanese technology to drive a new level of innovation in the U.S. market. However, neither of these scenarios is likely in our opinion.
The theory that Sprint will move to acquire T-Mobile (with MetroPCS rolled in for good luck) is more a case of wishful thinking than reality. The DoJ blocked AT&T’s acquisition of T-Mobile based, at least partially, on the argument that the merger would result in a less competitive landscape (with only three large carriers). And it should be noted that one of the loudest proponents of this theory was Sprint. The suggestion that Sprint (backed by Softbank) could succeed where it successfully argued that AT&T could not seems implausible. The case would remain that the U.S. market would be dominated by three, not four major competitors. Indeed, one could expect AT&T to be incredibly vocal on the matter, with good reason.
Additionally, such a merger would be painful to swallow. A combined Sprint/T-Mobile/MetroPCS entity (if it were to be allowed) would take years to merge into a cohesive unit and by the time it was all completed into a unified network, the U.S. market would have effectively become a two-carrier nation. Rather, T-Mobile and Sprint would be better suited to remain distinct competitors.
Another suggested benefit of the Softbank acquisition would be the potential infusion of mobile banking and other innovative technologies that exist in the Japanese market, but have not yet succeeded (or even transpired) in the U.S. market. On this suggestion, we would also like to throw some cold water. While Softbank – and other Japanese carriers such as NTT DoCoMo – have been long time proponents of mobile banking and other technologies, this does not necessarily mean that Softbank would be able to quickly bring these to the U.S. market.
NTT DoCoMo was an investor in AT&T Wireless (the original “blue” version) and the goal there was to bring DoCoMo’s much-vaunted i-Mode mobile web solution to the U.S. (not to mention NFC capabilities). And while i-Mode did make an appearance (as mMode), it fizzled quickly. Simply put: what works in another country does not necessarily succeed in the U.S. with its vast (and very diverse) population and different regulatory structure.
Which leaves a bit of a head-scratcher: why exactly is Softbank interested in Sprint? The answer could simply be that Sprint is the number three carrier and – with the correct nurturing – could be a very valuable addition to Softbank’s portfolio. With patience and a stronger network, Sprint can definitely become a more formidable player in the U.S. in its own right. Furthermore, Softbank could potentially benefit from Sprint’s knowledge and technologies. Since the days of DoCoMo and AT&T the mobile balance has swung somewhat: with the clear focus on mobile data and Internet access, the real giants are the app developers, ranging from Google and Facebook down to the next, as yet undiscovered, super-app. And most of these are U.S. based. This is not to say the potential deal would not be mutually-beneficial: Sprint will gain from Softbank’s mobile commerce knowledge. But just don’t expect a giant leap forward if the acquisition comes to fruition.