And the deal was announced: Japanese giant SoftBank will invest $20.1 billion in American No. 3 cellphone service provider Sprint. 70 percent stake, an enormous bet that has been cooked for the last months and that aims to trump the duopoly of Verizon and AT&T that has long controlled the American market.
Sprint needed this cash shot. The company was overwhelmed by debts (nearly $21 billion in long-term debt as of June 30) because it had committed billions of dollars to revamping its infrastructure. It has lost money every year since 2007 and it was time to breathe fresh air. Now it will maintain its headquarters in Overland Park, Kansas, and Dan Hesse will remain CEO.
Closing is expected in mid-2013. The combined company could think about other deals (maybe buying more spectrum and other operators?) and make a run at a merged MetroPCS-T-Mobile.
For SoftBank, which until last year was the only Japanese service provider to offer the iPhone, this has been a juicy game plan: the American market is one of the largest and most profitable in the world. In 2006 SoftBank bought Vodafone‘s Japan arm for $15 billion. For some business watchers there is a clear winner:
“There are no synergies whatsoever in a Japanese company buying a U.S. telecom operator,” explained to the NYTimes Sanford C. Bernstein’s analyst Craig Moffett. “This is tantamount to Japanese buyers buying Rockefeller Center.”
What about consumers? They might see different, innovative solutions that Japanese and South Korean carriers did implement a long time ago: better maps, mobile payments and analytics, for example. In those Asian countries cellphones have been used for paying a subway ride for years.