Masayoshi Son clinches deal by letting it go
SoftBank Group Corp CEO Masayoshi Son has made a name for himself as the ultimate dealmaker, raising almost $100 billion for investments with his Vision Fund. Yet after four years of haggling, he scored his biggest deal by simply letting go.
The agreement on Sunday to combine SoftBank’s Sprint Corp with Deutsche Telekom AG’s TMobile US Inc will create a US wireless carrier with a market value of more than $80 billion, matching SoftBank's market capitalization and making it its biggest holding.
SoftBank, a Japanese technology and telecommunications group, will own just 27 percent of the combined company, however, while Deutsche Telekom will own 42 percent and have voting and board control.
It is a far cry from the terms the companies discussed in their first round of talks in 2014, when Sprint was larger than T-Mobile and SoftBank was negotiating owning a majority stake in the combined company.
To clinch the deal, Son had to agree to let Deutsche Telekom control the combined company so it could consolidate it on its books. It was not easy letting go. SoftBank had acquired Sprint in 2012 with the aim of also taking over T-Mobile, rather than being Deutsche Telekom's junior partner.
When Son came round to the idea of giving up control last year, he changed his mind with a last-minute Uturn, ending the second round of talks between the companies in November.
“Sprint's weakening position forced it back into negotiations. SoftBank's leverage makes it difficult for Sprint to make massive investments in new infrastructure,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.
Even though Sprint’s customer base has expanded under CEO Marcelo Claure, growth has been driven by discounting. Analysts have said that without T-Mobile, Sprint lacks the scale needed to invest in its network and compete in a saturated market, and has struggled under its debt load of more than $32 billion.
T-Mobile, under its chief executive officer, John Legere, has fared much better. It has managed to score sustained market share gains, as innovative offerings, improving network performance and good customer service attract new customers.
After Son and Deutsche Telekom CEO Tim Hoettges ended negotiations last November, Claure and Legere stayed in touch to see how they could revive the deal, Claure said on Sunday.