Why Softbank buying Sprint is a big deal

Last week, the FCC gave their blessing on the Softbank purchase of Sprint. I consider this a very big deal and one that could have dramatic ramifications for the Wireless industry in the future. The leader of Softbank is a brilliant thinker and is never lacking in vision.

I have had the privilege of interacting with their founder and CEO, Masayoshi Son on numerous occasions and in fact did Fireside chats with him at two conferences in the late 1990’s. At that time, he became prominent because he bought Comdex, the largest PC show in the world in those days, and for his statement that he had a 300 year business plan for Softbank.

I got a chance to understand a bit about his business acumen and tenacity during one of our fireside chats. It took place at the Phoenix Technologies Conference at Spanish Bay in Monterey. Mr Son explained that in Japan, the telecom industry, which was basically controlled by the Japanese Govt. needed shaking up. It was controlled by NTT and the Japanese Govt dragged their feet when it came to open competition. This led to very low bandwidth Internet connections as well as a wireless infrastructure that, in his mind, was going nowhere.

So he approached the telecom Minister of the Japanese Govt, which regulated the telecom industry, and kept pushing him to present a plan that would open up the their telecom laws for more competition. He went to see this person at least 4 times and each time he was either rebuffed or was told he would look into it but nothing happened. So, on his 5th visit, he barged into this telecom Minister’s office with a full can of gasoline in tow. He told the Minister that if he did not agree to take his proposal to their ruling body that he would pour the gasoline over himself and light it on fire.The telecom Minister got the message and agreed to start the process of discussing opening up their telecom industry to competition. Because of that push by Mr. Son, Japan’s broadband and wireless industry began to explode. Softbank was the first to give users 50+ megs of download speed and I hear his goal is to get them to 1 gbps in the very near future. Softbank is now the #2 wireless company in Japan.

When I first heard that Mr. Son and Softbank had bid for Sprint, I had a vision of him walking into the offices of the FCC with his gas can in hand. However, given his success in Japan, everyone I talked to about this took his bid for Sprint very serious and knew that he would be tenacious in his desire to own this American Wireless company. However, his ownership of Sprint has to be watched very closely. He is not content with the status quo. One thing he could do is try and bump Sprint to 5G sooner than later and leapfrog ATT and Verizon. He could also utilize these assists, which includes Clearwire’s wireless spectrum, to create some type of mesh networks that blend wired and wireless in some areas to boost speeds for their customers.

Bottom line is that Mr. Son will not be a conventional wireless CEO. He is likely to be a firebrand within the wireless industry and do things that will irk and frustrate the competition. He wants to win, not just be a bit player in the US wireless market. Look for him to shake things up at the govt and industry level and perhaps surpass the competition and delight his customers along the way.

Apple’s Quiet, Brutal War on Wireless Carriers

Steve Jobs made no secret of his disdain for wireless carriers. In 2005, when Apple was still denying any interest in getting into the phone business,  Jobs sneered at the four major U.S. carriers as the “four orifices” through which the wireless business passed. With the launch of the original iPhone, Apple made a concerted, but failed, effort to change how the wireless carriers did business by getting AT&T to sell the phone without a subsidy.

iPhone 4SJobs had to make a peace of sorts with the carriers because that was the only way  to get the iPhone into the hands of customers. But now he seems to be wreaking posthumous revenge on his old foes. The problem is simple. The carriers are selling tons of iPhones. and  Apple is collecting all the profit. Sprint reported yesterday that it sold 1.8 million iPhones in the fourth quarter, 40% of them from customers new to Sprint.  But the massive subsidy cost, at least $300 a unit, contributed to a $1.3 billion loss in the quarter (and to Apple’s staggering profit in the same period.) As PCWeek.com’s phone maven Sascha Segan tweeted, “Sprint’s quarterly results show once again how the iPhone is a way to transfer $ from carriers to Apple.” In a CNNMoney post headlined “The iPhone is a nightmare for carriers,” David Goldman quoted Nomura Securities analyst Mick McCormack as saying: “A logical conclusion is that the iPhone is not good for wireless carriers. When we look at the direct and indirect economics that Apple has managed to extract from the carriers, the carrier-level value destruction is quite evident.”

There’s not a lot carriers can do about it. The original deal Apple offered in 2007 was almost certainly better for them. Apple relented after  AT&T pushed to renegotiate the deal and, more important, additional carriers outside the U.S. refused to go along with Apple’s terms. The carriers got what they wanted, and now they are paying the price, having yielded control to Apple over pricing, branding, apps. and just about everything else in the customer experience.

Cable operators might want to take a close look at what Apple has done to the mobile phone industry. It has been widely reported in the last few days that Apple has been talking to cable operators, including Rogers communications and BCE in Canada, about partnering in a long-rumored Apple television venture. Apple has no more love for cable operators than it does for wireless carriers, but it needed the carriers because they control the spectrum and it needs the operators because they control the content. Somehow, though, these partnerships have a way of becoming terribly one-sided. I hope Apple can revolutionize the television experience, but I’d advise the cable guys to watch their wallets.