It’s Official, Softbank Splashes Into the US Market

October 15th, 2012 by · 14 Comments

This morning Softbank and Sprint did the deed, announcing a series of definitive agreements in which Softbank will invest $20.1B in Sprint while taking a 70% stake in the company. Current shareholders will own 30% of the new entity, but with some shares being bought in cash for $7.30. The deal will give Sprint’s balance sheet a major boost, giving it a much easier path forward with its current LTE buildout plans and more options when it comes to deciding how to handle Clearwire.

It has been some time since we have seen any foreign telecommunications firm make an aggressive inorganic move on US markets like this. There is still the regulatory process to go through of course, but I suspect that for the most part this will be a welcome stabilizing influence to the FCC and DOJ. Once complete, Softbank will control the #3 mobile operator in the US, but also one of the top international IP backbones.

Many expect that once this deal is closed, Sprint will move to consolidate the Clearwire assets in some form, consolidating those specturm holders under one roof. That does seem to be a likely followup.

As I mentioned last week, however, I think part of the houscleaning may involve a decision on what to do with Sprint Wireline. Do they put real money into the fiber backbone to reverse its steady decline? Or do they use it as currency in an effort to cement infrastructure alliances for future backhaul needs? The wireline business was not mentioned in today’s PR, nor has the press been looking at it either.

Softbank will make today’s deal happen via cash on hand and new debt, with no equity transaction required.

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Categories: Mergers and Acquisitions · Wireless

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14 Comments So Far

  • mhammett says:

    I personally would like to see Sprint invest into its wireline infrastructure. So many have spent so much in the past few years to not even get close to the scale and prestige of Sprint’s network. Seems a waste to not maintain it.

    Plus with all of this mobile traffic growth, having that infrastructure sure will come in handy.

  • CarlK says:

    Quick Draw Craig McCaw has a long history with Big (3) including when he founded Nextlink which later became xo Communications on top of (3)’s dark fiber factory, a network which had somehow gotten in that nefarious hedge fund operator, ICON’s, hands……Who is ICON? Ask Enron!

    Four for Clwr owners will not go, it’s too low, and (3) is in The Cat Bird’s seat for that old wire line biz of Sprint. IMO

  • Anon says:

    I can’t imagine a less attractive proposition than getting into an capex war with AT&T and VZ, two of the Fortune 10. These guys borrow money for less than most countries. AT&T in particular spends Sprint’s annual free cash flow about every other week. Also, AT&T and VZ have a sizable head start and better customers (measured by ARPU, post-paids). Next someone will suggest they merge sprint wireline with century link – as if adding together boat anchors will make them float (oops, sorry Rob you already did).

    • mhammett says:

      Actually, the Fortune 15. 😉

      AT&T and VZ also have substantial landline operations.

      AT&T and VZ are also less likely to be on the plus side when it comes to new spectrum, which is important.

      I love these anonymous posts.

  • CarlK says:

    While WRONG STREET media outlets like cnBS continue to discount the IMPORTANCE of CLWR being the linchpin ingredient of Softbank as well as Dan The Huckster over at Sprint’s new plans; others know the score card well.

    This line caught my attention as I hope these ABUSIVE PARENTS end up paying a Dear Price for their valuable network partner in CLWR, especially while considering how this saga has developed overtime, i.e. The Lightsquared disaster!

    This Dear Price should end up trumping the DREARY CONSENSUS being suggested by The Masters of the Universe who keep implying FOUR pps is enough, because it’s not. IMO

    It’s pure conjecture but it makes sense that Clearwire’s Chairman John Stanton has been at the center of this deal to acquire Sprint. When you are largely owned by an abusive parent, there are always ways to end the abuse.

    • Grant Lewis says:

      CarlK – I do not mean to offend you but I have difficulty following your posts. Are you suggesting one of the primary reasons for the investment by Softbank into Sprint Nextel is for Clearwire sprectrum? I doubt highly that Stanton had anything to do with the softbank moves rather in my opinion Softbank is after growth and size to complete truly as one of the top 4 global providers.

  • CarlK says:

    People here may be relying on some anonymous “wannabee” LEVEL 3 Communications Director(LVLT), one who has been bragging about his large stake in that name more recently, and whose own name is partially associated with the investment nightmare, “ENRON,” for their investment decisions…..He, she or it along with their ilk have been very good at holding up that little company, Cogent’s(CCOI) nose bleeding price; however, I’ll give them that! IMO

    More important though is that recent spectrum transactions that have occurred in 2012 have ranged in value from $0.15 per Megaherz pop to $0.40. If you used the higher number, then Clearwire might fetch as much as $9 or $10 a share in value. With the looming spectrum shortage in the United States, one could even argue for a higher number.

  • Walter Scott says:

    Why would Softbank buy Clearwire when it doesn’t own all of the spectrum it has.

    A  large part of the 2.5 spectrum Clearwire controls is leased from charitable entities like the Catholic Church or other not for profits who were granted it by the U.S. Govt.

  • Walter Scott says:

    More on the 2.5 spectrum owned by the Catholic Church and leased to Sprint and Clearwire:

    Among the most sought after spectrum currently available in the US (and widely available internationally also) is the 2.5 GHz range.  This is very effective for the delivery of point to multi point signal to many users.  The spectrum range supports robust bandwidth capability and with licensed power allotments and WiMAX technology it supports NLOS capability and far reduced or eliminated truck roll installations.  Users can often self-install.  There are two types of 2.5 GHz licenses.  One is broadband radio service (BRS), the commercial version of the license.  These licenses can be owned by commercial companies and bought and sold basically at will. 

    The second is educational broadband service (EBS) which can only be owned by educational or religious type organizations with a scholastic mission.  In the US, the Catholic Church is a major holder of this spectrum.  These licenses can be leased for use by commercial entities.  In the US, Sprint/Nextel control about seventy percent of the BRS/EBS licenses .  Clearwire controls approximately another fifteen percent—with the balance held by several smaller block holders.  In fact, Clearwire and Sprint concluded a deal shifting some of Clearwire’s licenses in metropolitan areas to Sprint in exchange for a larger number of rural or smaller tier city licenses prior to the two companies agreeing to merge their combined 2.5 GHz assets.

    • mhammett says:

      2.5 GHz’s use in a mobile environment is shaky at best. Attenuation is just too great for it to really work well. This is spoken by a man that has used Clear’s network (via Sprint WiMAX phones) for over 2 years.

      Because of this attenuation (combined with adequate hand-off implementation), there are often large gaps in mobile coverage. I am often without WiMAX signal in the Chicago metro, which is supposedly blanketed.

      • Alone, perhaps. But if paired with sub-1Ghz spectrum in a well-designed network, one ought to be able to use it to substantial effect.

        • mhammett says:

          Oh, agreed that when effectively used with a lower band it’ll work great. Maybe we’ll see that with an eventual pairing of Sprint’s LTE with Clear’s LTE (if it shows up).

          You might even be able to raise the ceiling to 1.5 or 2 GHz and still have effective mobility. The 3G networks seemed to be pretty good at it. Then again, the more complex modulations and methods employed by faster and faster protocols usually require better and better SNR. Even if the noise floor remains constant, more signal is required to achieve full capacity on a newer network than an older network.

          Tangent: Recently (in terms of government time), the FCC asked the mobile guys if they wanted a band around 3.5 GHz. They said no. I think the FCC is moving forward with that anyway. We fixed guys would love another 100 MHz around 3.5 GHz.

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