HONG KONG--Softbank Corp.'s (9984.TO) acquisition of Sprint
Nextel Corp. (S) will likely give the Japanese company effective
control over two U.S. wireless carriers that hold rights to coveted
airwave spectrum, making the $20 billion deal more appealing.
For U.S. consumers, that could translate into better network
quality and more affordable smartphone payment plans, analysts
said.
Last Monday, Softbank revealed plans to buy a 70% stake in
Sprint. Less than a week later, Sprint disclosed its intention to
raise its stake in Clearwire Corp. (CLWR), a small but
spectrum-rich U.S. wireless carrier, to slightly above 50%.
As the Japanese telecommunications carrier expands into the U.S.
market, it could take advantage of the combined spectrum resources
at Sprint and Clearwire to take on their larger rivals Verizon
Wireless and AT&T Inc. (T). Softbank could also strengthen its
global position in the still-nascent market for fourth-generation,
or 4G, wireless services, as Clearwire's planned 4G network will
use a technology compatible with what the Japanese company is
already using.
"In the telecom industry, having more spectrum definitely gives
you an advantage," said Tokai Tokyo Research Center analyst Yusuke
Tsunoda.
Telecom carriers are fighting over spectrum due to explosive
demand for mobile data and the need to build a faster network in
the age of smartphones. While airwaves that transmit wireless
signals are controlled by the government, telecom carriers and
broadcasters license airwave spectrum to operate their services.
How much spectrum access a carrier has can determine its coverage,
service quality, and ultimately its competitiveness in the
industry. The battle over spectrum has been a major factor behind
recent major telecom deals in the U.S. and globally. AT&T, for
example, cited the need for spectrum in its failed attempt last
year to take over Deutsche Telekom AG's (DTE.XE, DTEGY) T-Mobile
USA for $39 billion. Earlier this month, T-Mobile agreed to merge
with smaller U.S. rival MetroPCS Communications Inc. (PCS), a
marriage analysts have said would address the two carriers'
spectrum needs.
Sprint is moving to raise its stake in Clearwire to 50.4% from
48%. With a majority stake, Sprint still won't have complete
control over Clearwire, as executive changes and other major
decisions require votes from 10 of Clearwire's 13 board directors
due to a previous agreement.
Still, Sprint's intention to buy an additional stake "is likely
another step in an evolutionary process that could eventually
result in the company gaining sole control" of Clearwire, said
Fitch Ratings, in a note Friday.
"The Softbank deal gives Sprint significant financial
flexibility and a broader range of options, including how to
address the longer term strategic options with Clearwire," Fitch
added.
As part of Softbank's acquisition, debt-strapped Sprint will
receive an $8 billion cash injection from the Japanese company.
Softbank's deeper ties with Clearwire via Sprint could also
speed up construction in the U.S. of a certain type of 4G network
called TD-LTE, which is compatible with the technology Softbank is
already using for some of its 4G mobile services in Japan. China
Mobile Ltd. (CHL, 0941.HK), the world's biggest mobile operator by
subscribers, also supports TD-LTE, and Beijing last week disclosed
plans to allocate wireless spectrum for a next-generation network
using the same technology. Clearwire could provide Softbank with a
larger global presence in the TD-LTE market, which would put the
Japanese company in a better position if TD-LTE becomes a major 4G
standard in the future, industry observers said.
Sprint Chief Executive Dan Hesse told The Wall Street Journal in
an interview last week that access to Clearwire's spectrum is
important. "What Clearwire does is that it balances our portfolio
by providing that really high-capacity capability," Mr. Hesse
said.
A Softbank spokesman declined to comment on Sprint's decision to
raise its stake in Clearwire or the move's implications.
Spectrum was a factor behind Softbank's recent decision to buy
smaller Japanese carrier eAccess Ltd. (9427.TO) through a $2.3
billion stock-swap deal. At an Oct. 1 press conference disclosing
the deal, Softbank Chief Executive Masayoshi Son said the spectrum
owned by eAccess would help Softbank's next-generation fast-speed
mobile service compete on more-equal grounds with similar services
offered by larger Japanese carriers NTT DoCoMo Inc. (DCM, 9437.TO)
and KDDI Corp. (9433.TO).
In an interview with The Wall Street Journal last week, Mr. Son
said he wouldn't rule out further deals in the U.S. even as he
focuses on closing the acquisition of Sprint.
--Thomas Gryta and Daisuke Wakabayashi contributed to this
article.
Write to Juro Osawa at juro.osawa@wsj.com.
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