The Reason Why Softbank’s Son Merged Two Mobile Carriers

Masayoshi Son

Masayoshi Son

On 23 January, Softbank announced the merger of its group businesses, Softbank Mobile, Softbank BB, Softbank Telecom, and Y!mobile, with Softbank Mobile as the merging company.

Under the new organization, Masayoshi Son, currently the president of Softbank Mobile, will become the chairperson, while the president’s post will be succeeded by Ken Miyauchi, the incumbent vice president.

After bailing out the then ailing Willcom, Softbank went on to acquire emobile in 2012 in an attempt to obtain the bandwidth necessary for iPhone operation. Since then, the company steadily expanded its bandwidth domestically.

In order to provide a steady flow of fast communication services, a carrier has to secure as much bandwidth as possible. President Son’s original strategy was to keep both Softbank and emobile as two independent entities and apply for separate licenses whenever there was a new round of frequency allocation to secure more frequencies.

Mr. Son must have believed that he could push the above network strategy with overpowering advantages over NTTdocomo or KDDI.

However, the Ministry of Internal Affairs and Communications has decided that companies under a group shall be regarded as a single entity and saw emobile as a part of the group regardless of its affiliation, Softbank or Yahoo!, rendering his strategy meaningless.

As a result, emobile was given a fresh start as Y!mobile instead of being acquired by Yahoo! Probably, Mr. Son found it useless to keep it as a separate company. This time, he further decided to combine BB, Telecom, and Y!mobile, by keeping Softbank as the survivor of the merger.

Absorbing Y!mobile at this particular moment also holds technical and strategic significances.

Carrier aggregation (CA), one of the LTE-Advanced technologies, aims at faster and more stable communications by bundling frequency bands. Presently, the Japanese government does not allow two different companies to unite their respective bandwidths.

Under this restriction, Softbank iPhones are either used within Softbank’s 2GHz bandwidth or Y!mobile’s 1.7GHz, but they are not used as a single bundle through carrier aggregation technology. To enable CA, the first step has to be bundling companies.

Behind the merger of Y!mobile, there must have been an understanding that it should be a wise decision to unite the companies to enable CA for iPhone, their core service.

During his bid for T-Mobile US following the acquisition of Sprit in the US, Mr. Son was reported as saying, “We cannot win the race with the team of four carriers against the top two. Three-carrier formation should be more desirable.” This merger actually brought about the desired three-carrier strategy in Japan.

For Mr. Son, the merger may officially signify his readiness to beat NTT docomo and KDDI, the two giants dominating the domestic market.