SoftBank's split into two companies could protect Japanese business from Sprint's struggles

Japan's SoftBank said it would separate its domestic wireless business from its majority stake in Sprint (NYSE:S) and other overseas businesses.

Nikesh Arora, a former Google executive who was named president of SoftBank last year, will run the overseas management company, while Ken Miyauchi will head the Japanese telecom business as well as other domestic endeavors.

The move could help SoftBank protect its profitable Japanese businesses from Sprint, which has weighed down shares of its parent company in recent months. Shares of SoftBank dropped 18 percent during a four-day slide in January as its market capitalization fell to $46.7 billion, substantially below its stake in Alibaba that was reportedly worth $55 billion.

The slide followed headlines that Sprint had finalized plans for a dramatic network overhaul, although the carrier has said those reports were inaccurate.

Bloomberg last week said Sprint Chairman Masayoshi Son plans to create a subsidiary of SoftBank that will accept some of the carrier's network gear and spectrum as collateral for billions in loans this year. The U.S. carrier hopes to secure between $3 billion and $5 billion in loans for the spectrum, which is estimated to be worth more than $115 billion.

Sprint is $32 billion in debt and owes $10 billion that will come due by the end of 2020. It must make $2.3 billion in debt payments this year, and its financial woes are exacerbated by a sagging junk bond market that will likely make refinancing more difficult.

Sprint continues to work to cut as much as $2.5 billion from its budget by reducing its headcount, trimming network expenses and slashing its marketing costs. Analysts expect it to post a net loss of $1.5 billion for its fiscal year ending in March, according to a recent Bloomberg story. Moody's downgraded Sprint to a high-risk B3 in September, saying the operator hadn't done enough to stabilize its financial situation.

For more:
- see this Sprint press release

Related articles:
Sprint hopes to secure as much as $5B from mortgaging spectrum and network gear
Sprint 'undeniably improving' with half a million new customers and improved financial guidance
Sprint to get $1.1B in cash thanks to handset leasing vehicle
Sagging market for junk bonds is just more bad news for Sprint

Sponsored by ADI

What if we were always connected? With the help of our advanced wireless technology, even people in the most remote places could always be in touch.

What if there were no ocean, desert, mountain or event that could ever keep us from telling our stories, sharing discoveries or asking for help? ADI’s next-gen communications technology could keep all of us connected.

Suggested Articles

AT&T has shifted its Cricket prepaid brand to a 100% authorized retailer model, according to Wave7 Research.

The FCC decided to extend the timeline for responding to Huawei's application for review until December 11.

All operators are trying to understand the intersection between their networks and hyperscale networks. But who gets the lion's share of the revenue?