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Masayoshi Son
Country of residence : Japan
Birthday : 08/11/1957
Linked companies : Softbank Corp

FOCUS: Softbank's new growth strategy awaited as T-Mobile buyout bid fails

08/08/2014 | 09:41pm US/Eastern

A new global growth strategy is awaited from Japanese telecom giant Softbank Corp. as its Chief Executive Officer Masayoshi Son's ambition to challenge the top two rivals in the U.S. market faced a setback with its foiled bid to acquire T-Mobile US Inc. through its subsidiary Sprint Corp.

Analysts said market players are closely watching how Softbank will shore up the business of the third-largest U.S. mobile carrier Sprint, which it acquired in July last year for $21.6 billion, without increasing the scale with the No. 4 player.

Some others said that the Japanese company dropped the bid as it might be considering better options to expand its business through other mergers and acquisitions not only in the field of telecommunications.

Although Son has denied officially announcing the deal and declined to comment on the reports, he has repeatedly said the current duopoly in the U.S. market by Verizon Wireless and AT&T Inc. is undesirable, showing eagerness to expand the size of the market and compete against the top two, which boast about double the number of subscriptions each compared with Sprint or T-Mobile.

In the past several months, there were reports that Germany'sDeutsche Telekom AG, the parent of T-Mobile, accepted Softbank's plan to purchase T-Mobile, and Sprint would pay around $40 per share in the deal.

But to industry watchers' surprise, reports citing sources abruptly emerged earlier this week that Softbank was suspending negotiations over the buyout due to difficulty gaining approval from U.S. regulators, who fear the merger would leave the market with too few major mobile carriers.

In reaction, Softbank's share price tumbled 3.5 percent on the Tokyo Stock Exchange on Wednesday, raising concerns over the business performance of Sprint, which would have to shoulder on its own the huge burden of investing in communications network infrastructure.

Tsutomu Yamada, market analyst at kabu.com Securities Co., said the reports elicited a sense of disappointment, adding, "Masayoshi Son's expansion dream in the United States fell apart."

Yamada said the company needs to come up with an alternative way to increase the number of subscribers and improve the communication services of Sprint, which has lagged behind its rivals in the development of high-speed communication infrastructure.

On Friday, Son said at a press conference in Tokyo that the first priority for the time being would be to enhance Sprint's business on its own by trying to cut costs and wage a price war.

But it remains unclear exactly how he is going to do it.

Yamada said market participants are pinning their hopes on what new measures could be introduced under the leadership of incoming Sprint CEO Marcelo Claure, the founder of Brightstar Corp., who was newly appointed to replace Dan Hesse.

While some still think that Softbank's suspension of the buyout negotiation is temporary and the company could resume the talks, others view that as unlikely, saying the company would need to have a very good reason to change what U.S. regulators have been opposing.

In fact, U.S. Federal Communications Commission Chairman Tom Wheeler released a statement saying, "Four national wireless providers are good for American consumers. Sprint now has an opportunity to focus their efforts on robust competition."

In addition to the opposition by the U.S. authority, the acquisition of T-Mobile seems to have become more complicated as French telecommunications service provider Iliad S.A. offered T-Mobile $15 billion in cash to obtain its majority share, though the offer was reportedly turned down.

U.S. satellite television provider Dish Network Corp., which challenged Softbank's bid to acquire Sprint last year, is also apparently interested in purchasing T-Mobile.

Although Softbank was seemingly dealt a blow with the collapse of the deal, some analysts said it was preferable to spending a lot of time and a huge amount of cash on it.

Satoru Kikuchi, senior analyst at SMBC Nikko Securities Inc., said, "Giving up the (T-Mobile buyout) bid was actually good in the end. This could be an opportunity to think about a global business expansion in a different way from the past."

He said one possible reason for the quick suspension of negotiations with T-Mobile could be the emergence of new acquisition targets that mesh with Softbank's growth plan.

"We see a wide range of promising fields for acquisitions, including media, news and information distribution, entertainment, SNS (social networking services), e-commerce, personnel services, robots and alternative energy," said Kikuchi.

Softbank has actually been acquiring gaming companies and developing a humanoid robot on top of its main communications businesses as Son said it aspires to become one of the largest companies in the world.

"I believe chances lie in various places," said Son at the press conference. "Softbank will expand its business scope further in overseas markets," he said.

(c) 2014 Kyodo News

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