Why a SoftBank Investment in Sprint Could be Disruptive
There were multiple stories over the last few days about a potential investment from SoftBank in Sprint. The idea would be that Softbank could leverage some of Sprint’s technology, especially the Clearwire architecture, for use in Japan as well as bringing Softbank’s mobile payment system to the US market via Sprint. Also, a cash infusion from Softbank would allow Sprint to build out their LTE network faster than planned.
However, none of the articles I have read convinced me that these writers actually know what SoftBank’s real intention is and why they would really want to invest in Sprint, a company that has seen declining subscribers and a slowing of revenue. However, SoftBank is the kind of company that could surprise people in the end with why and what they want from Sprint.
SoftBank is known as a maverick company in Japan and their colorful founder and CEO, Masayoshi Son, often called the Steve Jobs of Japan, is just about as eccentric as Steve Jobs was. I served on the Comdex board of advisors for 18 years and in the late 1990’s when Comdex was sold to SoftBank for over $600 million dollars, I got to meet Mr. Son and get to know a little about how he thinks and operates.
I happened to be overseeing a conference for Phoenix Technologies back then and Mr. Son, who had a tight relationship with Phoenix, was asked to come and present at this event at Spanish Bay around the time he bought Comdex. One of the things he said that got a lot of media at the time is that his vision for SoftBank was a 300-year vision, and he was planning all projects, and acquisitions, with this in mind.
But he also shared a story that kind of gives you a feel for how he really operates too. He told us that when he was planning to enter the Japanese telecom market, he had been lobbying with the government to open up what is a stringently controlled market highly influenced by the government backed telecom provider NTT. He told us that after four or five meetings with government officials, he was getting nowhere with them.
So, one day he went back to the top government official’s office and barged in with a can of gas and locked the door behind him. According to my notes from this event, he showed the can of gas to the government official and told him he would pour it on himself and light it if he did not listen to him and promise to take action. We all had a good laugh at this story and thought he just made it up to illustrate a point. But it turned out this is exactly what he did and to his credit, he got the complete attention of the top telecom official and other government executives and within a year they allowed SoftBank into what was their closed telecom service industry.
Over the last decade, SoftBank has become one of the most powerful companies in Japan’s telecommunications market and has investments in all types of businesses and ventures around the world. It turns out that Mr. Son really is serious about a 300-year vision and is putting the pieces in place to make SoftBank a mover and shaker in a lot of industries for a long time to come.
While some question SoftBank’s ability to make such a huge investment given the leveraged debt it already has, if anyone can do it, it would be Masayoshi Son. And if he did so, the technology direction and transfer of technologies most likely would benefit both and, more importantly, would make Sprint more competitive with AT&T and Verizon. In fact, the CEO’s of Verizon and AT&T have to be looking at a potential deal between SoftBank and Sprint with concern. They are acutely aware of Mr. Son’s track record as one who shakes up industries and has a way of moving companies he has bought or put money into in new directions that many cannot predict.
While the technology and business reasons we can ascertain from both companies strong points make sense, I have a sneaky suspicion that Mr. Son has another motivation behind this move. Sources tell me that Mr. Son and SoftBank have been very interested in the US telecom market and been amazed at the slow development of extremely high-speed Internet connections available for business users and consumer users alike.
In Japan, SoftBank has made ultra high speed Internet connectivity of at least 75 megs per second, the cornerstone of Mr. Son’s telecom push and has plans to give consumers consistent speeds of well over 100 megs per second in the works today. Now these are wired connections but even so, this is huge compared to the measly 12-15 mgs I get from Comcast in my home if all conditions are right.
Given the extremely slow moves of the cable and telecom companies of getting ultra-high speed connectivity to their customers, if SoftBank and Sprint began moving the needle so to speak, quickly in this direction, it would put huge pressure on the competitors to follow suit. I for one would love to see this happen and not only see Sprint become a more solid competitor to AT&T and Verizon but with SoftBank, perhaps become the catalyst to get all of us Internet connectivity speeds at least equal to what they have in Japan now.
Of course, there are still regulatory hurdles to overcome as well as scrutiny by anti-trust organizations for this SoftBank/Sprint deal to happen. And then there are the banking issues to deal with too. However, if the heads FCC, FTC and other regulatory agencies see a Japanese man in their lobby with a can of gas, it is not a terrorist. It’s just a maverick Japanese business man who is frustrated with the slow movements of the FCC and telecom companies to provide really high speed bandwidth to the US and I suggest they be ready to talk to him seriously and be prepared to move faster on these key issues than they are today.