Can an Acquisition by Softbank Cure What Ails Struggling Sprint?
Sprint may be on the acquisition block. Softbank Corp., a Japanese mobile carrier, is reportedly in advanced talks to buy the U.S. wireless carrier.
The Wall Street Journal cited "a person with knowledge of the negotiations" as a source. The deal is expected to exceed $12.81 billion.
If the rumors turn out to be true, it sparks a rapid move toward wireless industry consolidation. Last week, Deutsche Telekom, the parent company of T-Mobile USA, agreed to acquire regional carrier Metro PCS for $1.5 billion. T-Mobile and MetroPCS are the United States' fourth- and fifth-largest carriers, respectively, behind Verizon, AT&T and Sprint.
Softbank is Japan's third-largest wireless carrier. A Sprint acquisition would give it an immediate international presence. As the Journal notes, it's a risky move for the company. But with Sprint's stock prices just above $5, the carrier is ripe for acquisition. AT&T or Verizon would not likely gain FTC approval to buy Sprint because of antitrust concerns.
Who's Fault Is Sprint's Woes?
We asked Atlanta telecom analyst Jeff Kagan for his thoughts on the rumors. He told us there's too much up in the air to determine whether an acquisition marks a good move for either company. The deal could take on many different shapes and sizes, and more questions than answers surround the rumor. But, he said, Sprint needs to do something.
"Sprint has a problem. Sprint was failing and dying. They brought in Dan Hesse as CEO five years ago and he had two jobs: to stop the collapse and to grow the company," Kagan said. "He repaired the company but he has not grown the company -- and we have to ask why."
Kagan poses a question: Are Sprint's woes Hesse's fault or the board's fault? He noted that Hesse has brought several acquisition deals to the board, including the MetroPCS deal, but the board would not approve them. The board may be nervous, he suggested, after the costly Nextel acquisition. Sprint acquired Nextel just before the industry transitioned from a voice business to a data business. In other words, the timing was bad. Kagan, for one, blames the board over Hesse for Sprint's current state.
Waking Up Sprint
"Sprint has not participated in acquisitions. Sprint has been like dear old grandpa in a coma in the hospital," Kagan said. "He's still lying there year after year after year. With this Softbank news, grandpa just opened his eyes. The question is whether or not grandpa is going to be able to get up and move around and grow."
Again, it's too soon to tell. If Softbank decides to grow Sprint and invests the necessary resources, it could turn the company around. AT&T and Verizon are growing and Sprint could too.
"This could be the factor that Sprint needs to wake it up and shake it up and make it grow again," Kagan said. "But there's so many things that have to fall in place and there are a lot of questions. But this is an interesting move on Sprint. We see grandpa opening his eyes and for the first time in years, there is a sign of life."