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SoftBank’s Sprint Rescue – What It Means For Sprint Enterprise Customers
Posted by Brownlee Thomas on October 15, 2012
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SoftBank plans to inject $20 billion ($12 billion cash and $8 billion of new capital) to acquire 70% of Sprint Nextel. The deal will give Sprint about $8 billion in new capital, which will be used to complete its Network Vision network modernization strategy that will be completed in 2013. The deal gives SoftBank direct access to the much larger US wireless market and also boosts its 2.5/2.6 GHz TD-LTE 4G carrier ecosystem (the 2.5/2.6 GHz spectrum band also is licensed by Clearwire in the US, and Clearwire is 45% owned by Sprint). In addition, Sprint said previously that the devices running on its own FDD-LTE 4G network also run on TD-LTE, allowing it to offload customer traffic onto Clearwire’s network as needed. SoftBank claims that the deal, for which no regulatory or shareholder obstacles are expected, will close by mid-2013 and will make it the No. 3 mobile operator in the world, with $32 billion in revenues after Verizon with $37 billion and China Mobile with $43 billion, and just ahead of AT&T, also with about $32 billion, and Vodafone with about $31 billion. It also will have 96 million subscribers in the US and Japan.
The news should help assuage the fears of Sprint’s enterprise customers who’ve been worried about its future viability as a distant-third player in the US mobile market, with 14% postpaid subscriber market share against AT&T’s 30% and Verizon’s 39%. (According to Sprint internal estimates, T-Mobile has about 9% and other mobile providers have 8% of US postpaid subscribers.) SoftBank’s readiness to invest in Sprint, assuming successful and early closure of the deal, will allow Sprint to consolidate its disparate networks (2G iDEN, 2G cdma and 2.5G EVDO, and FDD-LTE 4G) in 2013 and thereby eliminate at least $150 million in duplicative annualized network operational costs. It also should improve enterprise buyers' confidence in Sprint’s ability to attract foreign capital for growth, with the added bonus that SoftBank understands its challenges to move beyond recovery to stronger margins and sustainable net growth. If you’re in the process of negotiating a new contract or renewal with Sprint, ensure that you take a close look at your succession clause and termination provisions to ensure: 1) 100% requirement that the successor company meets each and every contractual obligation, and 2) you will be allowed to terminate some or all user lines at will and without financial penalty beyond a negotiated fee equivalent to no more than 50% of one year’s prorated spend with Sprint or a preset (and roughly equivalent) cash-out dollar amount.
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