Sprint goes Asian

As an AT&T retiree, long-time Sprint customer and one-time Sprint consultant, I have mixed emotions about the recent acquisition of Sprint by SoftBank. Here are some of the specifics that Larry Dignan details at ZDNet:
  • Softbank will invest $20.1 billion in Sprint. Of that sum, $12.1 billion goes to Sprint shareholders and $8 billion goes to the balance sheet.
  • 55 percent of Sprint shares will be exchanged for $7.30 in cash. The rest will become shares of the newfangled Sprint.
  • The deal closes in mid-2013.
  • The new version of Sprint will float a convertible bond that translates into common stock at $5.25. This move will dilute existing Sprint shareholders heavily.
Here are a few of the positives that Larry lists:
  • Sprint is clearly saved. The company had cash, but also had a lot of debt. It will still have a lot of debt, but a balance sheet that can take a punch. For perspective, Sprint had $21 billion in long-term debt and a market cap of less than $17 billion.
  • The Softbank deal also allows Sprint to keep its current executives and network vision in place. Sprint will be able to compete on LTE with the likes of Verizon and AT&T. Softbank CEO Masayoshi Son is basically betting that Sprint can disrupt the mobile market as Softbank Mobile has in Japan.
And here a few of the things that Larry says the deal does not do:
  • Softbank's cash infusion doesn't really eliminate Sprint's debt. It's not like Sprint deleveraged overnight. That reality will become clear in the years ahead.
  • Boost Sprint's network immediately. For all of Son's talk about how U.S. networks are too slow, it's unclear how exactly Softbank-Sprint are going to leapfrog LTE. At this point, Sprint is playing LTE catch up. 
  • Offer any synergy. Softbank can lend expertise and money to Sprint, but there aren't a lot of natural connection points. ... Softbank and Sprint are on two sides of the world.
  • Enable Sprint to stay independent. Sprint is still going to be squeezed from above and below. AT&T and Verizon lead the U.S. from above and Sprint will still be No. 3. The catch is that Deutsche Telekom orchestrated the T-Mobile-MetroPCS deal. In other words, T-Mobile will be stronger at No. 4 and could breathe down Sprint's neck for years to com. Sprint still could wind up merging with T-Mobile once the LTE rollouts are done.
I guess that last point is the one that has me wondering about the deal. Sprint has struggled for years in the quest for market share. I think that they are poised to take away some of that market share now that they offer the iPhone and have the cheapest data plan in the USA. Of course I could just be rooting for the home town team?

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