Telecom Lead America: Sprint Nextel is set to gain from Softbank’s multi-technology LTE experience.
Chris Nicoll and Steve Hilton, principal analysts at Analysys Mason, analyzed opportunities and challenges in the US market for Japanese operator SoftBank after its decision to pick up stake 70 percent stake in Sprint, the third largest US mobile operator.
We are cautiously positive on the investment in Sprint by Softbank. Foreign investment in US Telecoms has had a decidedly neutral result to date and while the financial investment in Sprint is significant, Sprint has significant technical and market challenges to overcome in the next 12-24 months while Softbank added a huge international acquisition to its portfolio.
The $8 billion into Sprint is a significant investment and should allow Sprint to complete not only the Network Vision network consolidation project on-time, but also to speed deployment of LTE in the US which is needed in order to keep up with AT&T and VZW and try and get ahead of T-Mobile. Yet, all of this investment still puts Sprint in a distant #3 position in the US with an aggressive T-Mobile close behind.
We believe the next step for Softbank is to acquire rest of Clearwire. Sprint owns 48 percent of the WiMax-based company. The 2.5GHz spectrum licensed by Clearwire could provide 50-100Mbps internet service with the proper technology investments (TD-LTE). Funding has been a problem for Clearwire and this is a perfect fit for Softbank’s larger corporate strategy.
Sprint will gain some benefit from Softbank’s multi-technology experience, however, Sprint is nearly 2x as large as Softbank already and is well underway with its Network Vision consolidation project so the question remains what additional experience Softbank will bring. However, the announcement of using TD and FD LTE adds yet another layer of network complexity.
Softbank is aggressively moving in its own market, having recently acquired eAccess with a total of 39 million subs. The company has a good track record of successful acquisitions; however, this is a multi-national investment that will bring additional complexity to Softbanks’s management team. The US market is unique in the world and requires deft regulatory handling that remains largely Sprint’s responsibility.
Will Softbank go on a Yen-infused spending spree in the USA? Softbank prides itself on being a mobile Internet company, not just an operator. As such its portfolio of mobile Internet assets in the US is decidedly weak. We anticipate Softbank will be shopping around for assets to complement this proposed Sprint acquisition – including MetroPCS and Clearwire.