SoftBank CEO Masayoshi Son said that Sprint (NYSE: S) needs "greater scale" if it is going to effectively compete in the U.S. wireless market, laying yet more groundwork for a potential combination between Sprint and T-Mobile US (NYSE:TMUS).
Speaking at the Re/code Code Conference, Son reiterated arguments he has made in the last few months that the U.S. telecom market is dominated by a few large players, most notably AT&T (NYSE: T) and Verizon Wireless (NYSE: VZ) in the wireless market. Son refused to discuss a deal with T-Mobile specifically, but had kind words for the No. 4 U.S. carrier.
"I strongly admire them," he said. "I strongly admire the price disruption." He also said he highly admires T-Mobile CEO John Legere; there has been market speculation that Legere would lead a combined Sprint/T-Mobile.
According to Japanese news agency Kyodo, Deutsche Telekom has accepted SoftBank's offer to buy T-Mobile. Son reportedly put forward the deal in a meeting with top executives of T-Mobile and Deutsche Telekom in mid-May and got a positive response. DT declined to comment on the report, Reuters said.
However, so far regulators at the FCC and Department of Justice have largely signaled their opposition to a combination between Sprint and T-Mobile. "They don't want to talk to us," Son said, according to the Wall Street Journal.
Son said the U.S. telecom industry is full of large players consolidating. AT&T's recently proposed $49 billion takeover of DirecTV (NASDAQ: DTV) comes hot on the heels of Comcast's (NASDAQ: CMCSA) $45.2 billion agreement to buy Time Warner Cable (NYSE: TWC).
SoftBank owns 80 percent of Sprint and Deutsche Telekom still controls 76 percent of T-Mobile. DT CEO Timotheus Hoettges said earlier this month that while he is open to creating a "super maverick" to challenge AT&T and Verizon, there are clear hurdles and regulators are wary.
It was noted to Son at the conference that both Sprint and T-Mobile are currently losing money, but according to Re/code, he replied that competing is not a three-month game, but a five-year or 10-year game.
"Neither one of them has a sufficient network today," Son said of Sprint and T-Mobile, both in terms of spectrum and other assets. Son said carriers need a nationwide network whether they have a small amount of customers or a lot.
Son acknowledged that right now Sprint is lagging behind in LTE coverage and network speed, but promised improvements. "I've only owned the company for six months," he said. "It takes a few years to build. We have to design the network."
- see this Re/code article
- see this WSJ article (sub. req.)
- see this CNET article
- see this Reuters article
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DT open to creating 'super maverick' with T-Mobile US, but is wary of regulatory hurdles
Sprint's Hesse: A stronger No. 3 carrier would be better for the industry
Report: Sprint to push forward with T-Mobile deal in next few months
Analysts: Sprint/T-Mobile must merge or one will fail
Article updated May 29 to include information about SoftBank's reported deal with DT.