Bits Blog: SoftBank Chief Hints at More Price Cuts for Sprint

Franck Robichon/European Pressphoto Agency Masayoshi Son, SoftBank’s chief executive, has been behind a sharp decline in prices for broadband and cellphone services in Japan.

  Sprint’s new unlimited wireless plan, announced last week after its $21.6 billion acquisition by Japan’s SoftBank, did not deliver the aggressive price cuts that some analysts had expected.
But cheaper plans could be coming.

In a phone interview, Masayoshi Son, SoftBank’s chief executive, hinted that further price cuts could be in the works as the company invests to upgrade Sprint, America’s No. 3 wireless carrier.

“We will be aggressive in technology, price packages, services on every front,” Mr. Son said from California on Wednesday. “At the same time, we will improve the network to be the world’s best,” he said.
SoftBank, the Tokyo-based Internet and mobile communications giant, has a reputation in Japan for undercutting rivals on price to gain market share. Mr. Son has been behind a sharp decline in prices for broadband and cellphone services in Japan.

Expectations are high that Mr. Son will bring that strategy to Sprint, which has struggled with subscriber defections for years and that Mr. Son will inject healthy dose of competition to America’s mobile industry.
But Sprint’s price cuts have not been particularly groundbreaking, and executives have said the cuts were in the works before the SoftBank acquisition.

Under Sprint’s new wireless plan, customers pay $80 a month for unlimited data, texting and calling, down from the $110 Sprint had charged for a similar pricing.

“This is not the ‘magic behind the black curtain’ moment that many were waiting for with SoftBank,” Jennifer M. Fritzsche, senior analyst at Wells Fargo Securities, wrote in a research note on July 12.
Sprint remains under pressure from T-Mobile USA, the No. 4 wireless network, which has been offering a $70 package for unlimited talk, text and data from earlier this year.

Verizon, the industry leader, offers a shared data plan with unlimited talk and text messages for $90 a month, while AT&T, the No. 2 network, has a similar plan for $85.

Mr. Son has said that he planned to invest $16 billion in Sprint over the next two years to shake off competition from T-Mobile while also closing the gap with Verizon and AT&T.

Most of that investment will be spent on base stations for Sprint’s advanced LTE network, he told the Nikkei newspaper earlier this month.

And if SoftBank’s past antics in Japan are a clue, Mr. Son could also start driving down prices.

Hesse remains CEO as Sprint, Softbank close $21.6B merger

SoftBank completed its US$21.6 billion acquisition of Sprint Nextel on Wednesday, capping a months-long effort that was complicated by two bidding wars and some national-security objections but is expected to produce a stronger rival to the dominant U.S. mobile operators.

Sprint CEO Dan Hesse will keep his post in the new company, called Sprint Corporation, while SoftBank founder, Chairman and CEO Masayoshi Son will be chairman of the new company. The company will remain in Overland Park, Kansas, and continue to be traded under the ticker symbol "S."

With the close of the deal, Sprint officially dropped "Nextel" from its corporate name just a few days after shutting down the network it acquired through its 2005 purchase of Nextel. The new Sprint will still have more than 55 million customers but will be a much stronger company than it was before SoftBank's buyout, benefiting from full ownership of former partner Clearwire and $5 billion of investments by its new majority owner. SoftBank will own 78 percent of the company.

Japan-based SoftBank first proposed buying Sprint last October, offering a total of $20.1 billion for the third-largest U.S. carrier in a deal that would include an $8 billion investment in the company. That investment would help Sprint buy out Clearwire and gain access to its huge radio spectrum holdings.

But in January, Dish Network launched a higher bid for Clearwire, and in April it offered to buy Sprint itself for $25.5 billion. Though Dish ultimately dropped both bids, its pressure drove up both the price Sprint paid for Clearwire and what SoftBank paid for Sprint. Ultimately, SoftBank slightly increased its bid and restructured it, giving shareholders more cash and Sprint just $5 billion of investment.

SoftBank's proposal also drew warnings from some U.S. lawmakers but ultimately passed muster at the Committee on Foreign Investment in the United States. Possibly the biggest national-security concern surrounded the homegrown Clearwire: In March, Rep. Mike Rogers, a Michigan Republican and the chairman of the House Intelligence Committee, said Sprint and SoftBank had pledged to try to replace gear already in Clearwire's network that was made by Huawei Technologies. The companies also promised not to buy gear in the future from Huawei, which has been accused of ties to China's military.

In another security move, Admiral Michael Mullen, former chairman of the U.S. Joint Chiefs of Staff, has been named to Sprint's board as security director.

Ronald Fisher, director of SoftBank and president of SoftBank Holdings, will be vice chairman of Sprint. Three Sprint Nextel board members -- Robert Bennett, Gordon Bethune and Frank Ianna, will also be on the new board. Other members of the board have not yet been determined, Sprint said in a press release.