By Jessica Kim
According to NY Times, Masayoshi Son, Softbank’s founder and chief, told investors during SoftBank’s annual general meeting on Friday, of his plans to enter the American mobile market through a $21.6 billion acquisition of Sprint along with its Clearwire unit. Softbank is one of Japan’s largest companies, with a market share that is three times of Sony's.
Mr. Son announced a bold decision to raise his bidding price against Dish Network, a satellite company and its rival in the bidding. Furthermore, Son announced he will be decreasing the capital investment for Sprint which stirred talks among analysts who fear this would decrease Sprint’s ability to invest in new infrastructure.
Mr. Son defended his decision by saying that over the course of four years, the acquisition is projected to generate yearly savings of over $2 billion. After acquiring Sprint, Mr. Son plans to pursue an aggressive strategy in pricing handsets and service contracts through the purchasing of mass quantities to decrease the cost per unit of output and forge a deal with phone makers.
Many analysts predict Mr. Son’s emergence in the American mobile market to be anything but easy, but Mr. Son has a record of successfully going up against large companies in the past. Mr. Son is confident in his decision and at the meeting told NY Times, “We’ve fought far tougher battles than this. It’s just been so much easier this time around.”
In 2005 when Softbank reported a $1 billion loss and a fall in its share prices to less than a tenth of its peak value in 2000, Mr. Son made the bold move to buy out Vodafone’s Japanese mobile unit for $15 billion, reportedly Japan’s largest acquisition at the time. This risk-taking mindset is what sets Mr. Son apart from other businessmen in Japan. Shinichi Sano, the author of Mr. Son’s biography published last year, told Bloomberg, “Son is always thirsty. He doesn't feel like living without gambling.”
In 1981, Mr. Son founded SoftBank as a computer magazines publisher company and then turned it into a computer software distributor. The company grew and evolved after a series of well-calculated investments, one of which included a one-third ownership of what was then a small start-up named Yahoo. With the profits garnered from Yahoo, he further developed his business by buying a part of Alibaba of China for $20 million, now the world’s largest e-commerce company, as well as investments in other ventures. Mr. Son’s big break came in 2001 when SoftBank began to offer fast DSL Internet services in Japan at half its competitors’ price. With these lower prices, the DSL market exploded to thirty times its original size in just two years.
This is around the time SoftBank decided to enter the strictly regulated mobile sector. After much negotiation and scuffle with the Ministry of Internal Affairs and Communications, to Mr. Son’s frustration, SoftBank was granted a license within a substandard range.
In 2006, Mr. Son announced a decision to acquire Vodafone’s suffering Japanese unit by borrowing what was equivalent to $10.3 billion at the time to cover the purchase. The next day, a triumphant Mr. Son returned his original license to the government. Ever since then, his moves have been daring, one of which included bringing the iPhone to Japan. Many doubted its success but since then, the iPhone has become Japan’s number one selling phone.
To protect SoftBank against possible failure, Mr. Son confirmed taking on precautionary measures like buying T-Mobile, America’s fourth largest carrier. If SoftBank’s Sprint bid succeeds, it will be an unprecedented overseas acquisition for Japan.