How Softbank's Eccentric Leader Will Change Sprint -- and America

You might wonder why Japanese billionaire Masayoshi Son wants to buy America's third-largest wireless network. The Softbank CEO is spending $20 billion on Sprint Nextel (NYSE: S  ) , which lags far behind market leaders Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) in every metric that matters. Yet Son hates the very idea of running third-best to anyone else. He explained the buy to CNBC's Jim Cramer like this: "I am a man, and every man wants to be No. 1, not No. 2 or No. 3."

So what's the big idea? Softbank's money will help Sprint compete, but it doesn't change the network's third-place market position.

Changing the game
An interview with Bloomberg this week gave us some new clues. Or perhaps Son simply shrouded his motivations in a whole new layer of mystery.

For one, Son thinks that data networking is the most important feature of any mobile service. Softbank derives two-thirds of its revenue from data plans, which is about twice as much as American networks. Voice and texting plans simply don't matter much to him.

This is a fairly revolutionary idea in the American market, where data is seen as just another service to sell alongside equally important voice and text plans. If Son can mold Sprint in Softbank's image, we'll have a genuinely new option on the local market.

And it makes sense in a long-term perspective. You can already use 3G or 4G data connections to send free text messages or make voice calls. In fact, apps like Apple's (Nasdaq: AAPL  ) Facetime and Microsoft's (Nasdaq: MSFT  ) Skype let you make video calls in real time, for free. If you have the right data pipe, you can push any traditional communications service you like right through it. The core commodity for a forward-thinking mobile network, then, must be the data service. Users will simply find ways to work around whatever other paywalls you set up.

"I can't share all my secrets, dude!"
But Son stopped short of sharing his entire vision for Sprint, and here's why (emphasis mine):

Actually, I already had Steve Jobs say he would give me the iPhone, before it was announced. The iPhone was not announced; Steve and I were very deeply discussing it. I never talked about that in public. So if I didn't have any interesting strategy [for Sprint], I wouldn't bet $20 billion.

See what Son did there? He's rubbing his visionary nature in our faces, and then he tells us to wait and see what he's got up his sleeve next.

It's easy to shrug at claims like that, assuming that the guy is out of his mind. But Softbank was in fact the first Japanese network to sell Apple's iPhones, so the Jobs connection is no fairy tale. And Sprint may lag behind the dynamic duo at the top, but it does own a solid nationwide network with deep connections to another one from (now majority-owned) Clearwire (Nasdaq: CLWR  ) . The company is in position to do something very interesting here, and Masayoshi Son might just be the right man for the job.

Finally, nobody ever became a self-made billionaire and owner of Japan's fastest-growing cell service by placing wild bets on imaginary opportunities. If I knew what he's planning, I should be running my own billion-dollar business (which I don't). But whatever it is, I'm guessing we'll see rock-bottom pricing on a data-based service bundle that enables his top-secret sauce.

The American wireless market is about to get a well-deserved kick in the pants. Maybe this is the wake-up call you never knew we needed.

Fool contributor Anders Bylund has no positions in the stocks mentioned above. Check out Anders' bio and holdings, or follow him on Twitter and Google+. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple, Microsoft, and AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 21, 2012, at 4:41 PM, nivegulu wrote:

    According to my research based upon nonlinear extrapolative trends (10th degree polynomial time series)..

    Clear's spectrum will be $6T, 50 years from now. Broadly based on my quantitative analysis and qualitative factors, the reasons are as follows:

    1. Almost total migration to mobile devices (including TV) by then.

    2. TDD-LTE 2.6 GHz only spectrum capable of supporting such capacity with functional speeds at these load levels.

    3. Multiple devices / connections per sub.

    4. Population growth.

    5. Turnover factor (capacity utilization per user in terms of data usage) of at least 10x.

    6. Further proliferation of smaller devices like the ipad minis.

    7. International roaming.

    A NLR (nonlinear regression analysis) was also done using different relevant independent variables with Spectrum Value as the dependent variable for 10 years of historical data. I plan to publish a whitepaper on this in the near future.

    The Class B value of $13.98 does not even come close to what the Class A share value should be. Maybe for today's holder of Class A shares $13.98 or higher is a start (in the event of a total buyout) but not so in the distant future.

    Son knows what he is doing to improve the quality of service, and challenge the duoply of T & VZ.

  • Report this Comment On October 22, 2012, at 12:25 PM, spokanimal wrote:

    Hesse is back to blowing smoke again.

    He is back to his never-ending habit of lowering expectations among Clearwire Investors...

    ... and they are falling in line... look at the downdraft in CLWR stock late last week as he blew his smoke.

    Softbank's Mr. Son made it clear last week that it's ALL about wireless "data". Any of us with our heads screwed on straight knows that that also means that it's all about Clearwire's spectrum and that there's never been any doubt that it's as much the target of Softbank as any of Sprint's assets are.

    Sprint got majority control from McCaw because softbank wants an assurance that sprint has a leash on clearwire. Sprint won't buy much more, because sprint doesn't have the dough for it "yet" and needs to focus all it's $ resources on Network Vision.

    Once Sprint gets it's $8 billion in buyout cash next spring, all that changes. I GUARANTEE you that Mr. Son ISN'T about having a bunch of independents on clearwire's board mucking up his plans.

    So Hesse blows his smoke, just like he did ahead of his recent contract deals with clearwire... and just as he did with Lightsquared... in his never ending quest to keep Clearwire selling for a small fraction of the net value of it's assets...

    ... until he "un-expectedly" buys clearwire out for a song next July!... exactly as Mr. Son and his obsession with clearwire's spectrum will require him to do.

    Spokanimal

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