Time for Sprint, SoftBank to take a bite out of the market

editor's corner

Our long national nightmare is nearly over. After months of handwringing, Sprint Nextel's (NYSE:S) shareholders have approved SoftBank's offer to acquire a controlling 78 percent stake for $21.6 billion, and SoftBank finally has the opportunity to prove that it truly knows how to shake up the U.S. mobile market.

The transaction is not slated to close till early July, pending FCC approval. However, SoftBank has had eight months, since last October when the deal was announced, to strategize its turnaround plan for Sprint, and the Japanese company has not been sitting idly while awaiting the deal's consummation.

When I met with SoftBank's PR folks in Tokyo last November, I suspect they never imagined the Sturm und Drang that would eventually come to punctuate this deal, thanks to Charlie Ergen's insertion of Dish Network (NASDAQ: DISH) into negotiations. At the time, members of SoftBank's PR team had already visited Sprint's Kansas headquarters, had met the campus canine and spoke reverently of Sprint CEO Dan Hesse, whom they referred to as Dan-san. My impression was that SoftBank intended to move very quickly once it was in control of Sprint, so it could get down to business.

At SoftBank's annual shareholder meeting last week, CEO Masayoshi Son said, "We want to be the world's No. 1 company in various terms including profit, cash flow and market value."

That actually sounds as though Son's ambitions may have grown. As I wrote in a special FierceBroadbandWireless report last year, Sprint is slated to play a crucial role in SoftBank's 30-year grand plan to become the "No.1 mobile Internet company" as well as the "No.1 Asian Internet company."

The Sprint takeover represents the largest outbound investment ever by a Japanese company, noted law firm Morrison & Foerster, which said it has been advising SoftBank since the deal was announced. Next up is Sprint's bid for Clearwire (NASDAQ:CLWR), in which MoFo (that's really how Morrison & Foerster refers to itself) is also representing SoftBank. Clearwire shareholders are slated to vote on that deal July 8.

Regardless of which way the Clearwire vote goes--and it appears right now that it will go Sprint and Son's way--SoftBank has the Sprint deal pretty well locked up.

So, let the games begin. U.S. consumers probably won't get the same funky TV ads with a talking white dog and Tommy Lee Jones that SoftBank uses in Japan, but darn near anything will be better than those scary film noir-type ads that Sprint ran featuring Dan-san looking as approachable and convincing as a cardboard cutout.  

I'm sure U.S. consumers are more than ready for SoftBank's ultra-low prices. But hot prices mean little without an LTE network that is as widespread and fast as Sprint's competitors, and that is SoftBank's first challenge. While I was writing this, an AT&T ad popped up on TV informing me that AT&T has "the fastest 4G network." That is a message that resonates.

Son promises to offer innovative market segmentation with new services and products, but he needs the spectrum and a network to pull this off. Sprint's LTE network only covers 110 U.S. markets so far, and some customers have been less than complimentary in online comments regarding the operator's actual working LTE coverage in markets it has officially launched. Further, Sprint's LTE network is limited to 5x5 MHz channels (5 MHz uplink and 5 MHz downlink) in its 1900 MHz PCS G Block spectrum, restricting the data speeds it can offer.

As my colleague Phil Goldstein noted in a recent article, Dish's Ergen could continue to be a thorn in Son's side. Sprint wants and needs to get its hands on the 1900 MHz PCS H Block of spectrum that is due to be auctioned, and if Ergen really wants to throw Sprint for a loop, he could bid on that spectrum, snatching it from Sprint's hands or driving up the auction price so Sprint has to pay more than it would otherwise.

After all the drama that has surrounded SoftBank's effort to take control of Sprint, getting down to business as usual will seem especially anticlimactic, particularly if SoftBank does come up with some grandiose schemes to generate viral buzz. It'd be quite disappointing if SoftBank's talking white dog turns out to be all bark and no bite.--Tammy