SoftBank CEO Masayoshi Son is now publicly pushing for a deal between Sprint (NYSE:S) and T-Mobile US (NYSE:TMUS), arguing that without consolidation no company can close the gap with Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T).
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Speaking after SoftBank release its quarterly earnings, Son said that it wasn't in his personality to settle for being the No. 3 or No. 2 player in a market, according to the Wall Street Journal; Sprint is currently the No. 3 U.S. carrier. Japanese operator SoftBank purchased control of Sprint last year and now controls 80 percent of the company.
While declining to comment specifically on a deal with No. 4 player T-Mobile, Son made clear he is pushing for a merger. "Without industry consolidation, for Sprint alone to become No. 1 in the U.S. is literally just a dream," he said, according to Bloomberg. "I'm not content for Sprint to remain No. 3 because if we could grow bigger, we will offer aggressive discounts and services, just like we did in Japan."
"There is a huge gap between the bigger two and the smaller two, thus the level of competition isn't sound or strong," Son added.
According to a recent Journal report, which cited unnamed sources familiar with the issue, Son and Sprint CEO Dan Hesse are going to use the next few weeks to regroup and re-evaluate their options for a deal with T-Mobile after receiving significant pushback from regulators. The report indicated they may still proceed with a deal, but will take the next few weeks to refine their legal and regulatory arguments for the transaction.
"By ourselves, all we can do is make Sprint's status as No.3 as healthy as possible," Son said, according to the Journal, adding that "with scale merit, we don't have to settle with No. 3. We can try to be No. 2 or No. 1 … we can compete fiercely."
In an interview with Bloomberg, Hesse reiterated what he said Tuesday on Sprint's fourth-quarter earnings conference call: that further consolidation outside of Verizon and AT&T would be healthy for the market and consumers. "I don't want to speculate on whether it's inevitable," Hesse said when asked about a possible deal. "I think it's logical, and that it would be positive for the industry."
Some analysts continue to be skeptical of the need for a deal. "Sprint will get it right and ultimately be in a position to challenge AT&T, Verizon and T-Mobile," Kevin Roe, an analyst with Roe Equity Research, told Bloomberg. "SoftBank does not need T-Mobile to achieve a Sprint turnaround."
Meanwhile, Sprint and Hesse are pushing to complete the company's Network Vision network modernization program by mid-2014, and then move on to building out the carrier's LTE coverage and capacity, especially using its 2.5 GHz spectrum. Sprint hopes to offer 2.5 GHz LTE coverage to 100 million POPs by the end of this year. Also by the end of this year Sprint hopes to cover 150 million POPs with its 800 MHz LTE network. By the middle of this year, Sprint hopes to cover 250 million POPs with its 1900 MHz LTE network.
Hesse told GigaOM Sprint has a "tremendous sense of urgency" to build its network, but said a network overhaul of this scale can't be rushed, especially because Sprint has been upgrading its entire 3G network as well.
"There's a complexity to this network build that's never been undertaken, in my view, by anyone in the world," Hesse said. "We're playing three-dimensional chess."
For more:
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this Bloomberg article
- see this separate Bloomberg article
- see this GigaOM article
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