How the Sprint-Softbank Merger Will Transform US Technology

Softbank, a top mobile operator in Japan, recently announced the takeover of Sprint Nextel, the third-top telecom operator in the United States. The deal, estimated at nearly $20 billion, is for the acquisition of approximately a 70% stake in Sprint Nextel, making it the largest acquisition by a Japanese company ever abroad.

The transaction will be extended through mid-2013. Softbank will invest approximately $20.1 billion in Sprint, where $12.1 billion will be paid to shareholders and $8 billion will be raised for new capital to strengthen Sprint’s foothold in a highly competitive market.

Softbank’s aggressive move, financed by more than $20 billion in loans by Mizuho Financial Group, Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Deutsche Bank, would be a big bet for the Japanese company, which has no experience in the US market.

Transforming US Infrastructure

The acquisition of Sprint alone represent a giant step in the internationalization process of Softbank, mostly known in Japan, whose foreign operations are concentrated on the internet – especially in Asia and particularly in China.

Spectrum

For its part, Softbank became the third mobile operator worldwide in terms of revenue, behind China Mobile and China U.S. Verizon Wireless. It also offers a place of choice on the mobile market in the United States, even if the markets believed to suffer from overstated prices.

According to the experts, with the support of Softbank Sprint should be able to install a more efficient 4G network, better competing with AT&T and Verizon. Sprint already has vast spectrum holdings, including sections of the 800MHz, 1900MHz, and 2.5GHz bands. The company uses 800MHz and 1900MHz blocks for its iDEN, CDMA, and LTE networks. The 2.5GHz block is where Softbank will concentrate to build the WiMax network, built in association with Clear.

Softbank may also help Sprint to fully acquire Clearwire, a wholesale U.S. wireless carrier. Clearwire controls 120 million MHZ of spectrum and is working on a next-generation network using TD LTE technology, which clearly align with Softbank’s network plans.

More LTE network

AT&T and Verizon Wireless currently rule the US market when it comes to deploying LTE capabilities. Verizon has more than 400 markets covered for LTE, and AT&T has more than 60 markets. Sprint is a late comer and has less than 20 covered so far.

However, Sprint is developing multi-modal base station technology that runs entirely on a digital IMS platform. Once finished, the technology is expected to be an advanced network compared to Verizon and AT&T.

Softbank was the first carrier to offer the iPhone in Japan, a big hit for the country, and its success has helped to shape Softbank’s brand image. Softbank also recently bought smaller Japanese rival provider eAccess, largely to gain LTE networks. Softbank President Masayoshi Son said both the companies can work together on building faster speed “4G” mobile networks in the US.

Making New Friends

Both Softbank and Sprint have CDMA networks, and both have product offerings that include devices made by HTC, LG, Samsung, Kyocera and Research In Motion, in addition to Apple. The overlap will help Softbank to procure smartphones and tablets at cheaper prices, in turn boosting their customer appeal in hopes of luring them back to Sprint’s network.

“Sprint’s tremendous focus on customer satisfaction would fit well with Softbank’s approach to the market,” said AnalysysMason’s analyst, Steve Hilton. “Traditionally Japanese companies have a very results-oriented approach to dealing with customers. Use of customer satisfaction statistics to drive improvement–long the hallmark of Sprint under CEO Dan Hesse–would fit well with Softbank’s approach. Both companies have CDMA networks, possibly affording some cost savings from larger purchase volumes from network vendors.”

Mobile Virtual Network Operator

There’s also an opportunity to extend Softbank’s network through Sprint’s existing channels, as Sprint allows other vendors to resell their access to its network. The technology often called mobile virtual network operator (MVNO) will companies to run their business under their own brands. Brands like Republic Wireless, Ting, Y PrepaYd, Zuma Prepaid and others are already using this technology.

Sprint and Softbank can both see MVNO technology as an opportunity to expand further in the US market.

About Saroj Kar

Saroj is a Staff Writer at SiliconANGLE covering DevOps, social, mobile and gaming news. If you have a story idea or tip, send it to @SiliconAngle on Twitter.