Analysis: Softbank deal's big on size, small on change

Tue Oct 16, 2012 7:30am EDT
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By Nicola Leske and Edwin Chan

NEW YORK/SAN FRANCISCO (Reuters) - It's this year's biggest technology acquisition and the largest outbound deal in Japan's history. But game-changing, it is not.

Softbank Corp's (9984.T: Quote) pricey $20 billion bid to buy control of No. 3 U.S. telecoms company Sprint Nextel Corp (S.N: Quote) marks a bold move by billionaire CEO Masayoshi Son beyond his flagging home market. Some analysts say it hands the U.S. company much-needed firepower to buy peers and build out high-speed networks.

But if Son succeeds, Sprint will still struggle to win customers in a market dominated by the twin towers of the U.S. mobile landscape - Verizon Communications Inc (VZ.N: Quote) and AT&T Inc (T.N: Quote) - while T-Mobile and MetroPCS Communications Inc PCS.N move to team up. That market dynamic will persist, analysts say.

Son, an unusually aggressive risk-taker in a cautious Japanese corporate culture who brought the iPhone to Japan, may still have more surprises up his sleeve, but analysts do not believe that the Sprint deal by itself can undermine the two U.S. market leaders' virtually unassailable position.

"Getting the technology out there is just getting you to the table," said Phillip Redman, analyst at research firm Gartner.

It will take more than the iPhone and a technology upgrade to improve Sprint's position, he said. Its brand value had dropped despite good work-around plans and pricing, partly because of its weak competitive position.

Under the agreement - which awaits regulatory and shareholder approval - Softbank will buy about 70 percent of Sprint Nextel for $20.1 billion.

Combined, the two will have 96 million users. But that includes Japanese subscribers and lags the almost 108 million subscribers Verizon had in 2011 and AT&T's more than 103 million, according to data from IHS iSuppli.   Continued...

A woman walks past a Sprint store in New York's financial district, October 15, 2012. REUTERS/Brendan McDermid