Possibility of SoftBank’s Sellout of Sprint

Masayoshi Son, CEO of Softbank

Masayoshi Son, CEO of Softbank

Would SoftBank sell Sprint?

When Masayoshi Son, chief executive officer of SoftBank was asked about the possible sellout of Sprint, he did not completely count it out by saying, “we are a listed company, and we’d better not talk too much”.

In the financial result interview, Son said, “we have recognized the steepness and height of the mountain as we challenged. You would not to know the depth of the river, until you cross it either. There is a room for challenge. It will be long battle”, and showed his readiness for long-term strategy for the financial reconstruction of Sprint.

Although they are downsizing Sprint’s R&D center in Silicon Valley for cost reduction, as for its network, they sent Junichi Miyagawa to its headquarters in Kansas City, and were making a sound improvements, thus, it came as a surprise for me.
If there is a peculiar person who would like to buy Sprint, Son would most likely be willing to sell it.

SoftBank obtained 78% of Sprint’s stock for 21.6 billion dollars (approx.1.8 trillion yen) upon the completion of the acquisition of Sprint in July 2013. At that time, it was 7.65 US dollars per share in the trade.

How about today?
Stock price has gone down to 5.23 dollars per share. There was time it exceeded 10 dollars, but its financial difficulties of late have been bringing the price down.
However, due to the acquisition capital of 20.1 billion dollars in 82.2 yen to the dollar funded by Kazuo Kasai who passed in 2013, in today’s weak yen, there would be considerable amount of the exchange gain.
Current market capitalization of Sprint is about 20.7 billion dollars, and that is about 2 trillion 460 billion yen. If it’s calculated as SoftBank owing 78% of its stock, it would be 1 trillion 918.8 billion yen.

In short, despite the decline of the company value, in consideration of the exchange rate, the price is about the same.
Currently, Sprint has enormous amount of 2.5GHz band, and according to Son, “If the free cash flow is minus, and the wave band will be excessive in the future, we will consider selling part of it.” Should Sprint’s financial situation gets worsen, SoftBank may sell its wave band.
However, if the long-term recovery efforts do not yield a drastic improvement of Sprint, it may keep pulling SoftBank’s leg.

In his heart of hearts, Son may want someone to buy Sprint as a whole soon. In some situations, it may not be too far-fetched that SoftBank loans some money to Marcelo Claure, CEO of Sprint, to let him buy back Sprint.