By Nicola Leske
NEW YORK, March 5 Masayoshi Son isn't used to
taking no for an answer. But the Softbank Corp chief's
pleas for a merger of the third- and fourth-largest U.S.
wireless carriers seem to be falling on deaf ears.
It is no secret that Son, known to have threatened
self-immolation to get his way in the past, wants to combine
Sprint Corp, which Softbank acquired last year, with
T-Mobile US Inc as part of his vision to create a
global industry leader.
Son plans to lay out his broader vision for the U.S.
wireless communications industry at the Chamber of Commerce in
Washington, D.C. next Tuesday. Speculation is rife that he will
talk about a bid for T-Mobile, although a person familiar with
the matter said on Wednesday that was not the plan.
Anticipation about a merger has already pushed up shares of
Sprint and T-Mobile 15.6 percent and 18.3 percent, respectively,
since Dec. 13, when media reports first emerged about Softbank's
interest in pursuing a deal as soon as the first half of 2014.
Three sources familiar with the undertakings of the
companies involved spoke on condition of anonymity for this
article because they are not authorized to speak publicly about
Son's advisors are telling him to cool his heels for the
time being, given the low odds of gaining antitrust approval,
after they met lawmakers and regulators over the past several
weeks in Washington and consulted with T-Mobile's parent
company, Deutsche Telekom.
Son, who has eyed T-Mobile for years, would rather move
sooner than later, before T-Mobile gets stronger and more
expensive. He reiterated his interest in a deal just last week
at the Mobile World Congress in Barcelona, according to the
people familiar with the matter.
"Everyone wants to do this deal; Sprint does, DT does,
Softbank does, the investors want it, the customers want it;
only the regulators don't want it," one of the sources said.
Whether customers actually want or would benefit from a
merger is debatable. Some consumer advocacy groups have warned
it could result in higher prices, job losses and fewer choices
Federal Communications Commission Chairman Tom Wheeler also
expressed his skepticism about a potential merger in meetings
with Son and Sprint Chief Executive Dan Hesse on Feb. 3,
according to an FCC official briefed on the matter.
His viewpoint echoed earlier comments from William Baer,
assistant attorney general for the antitrust division of the
U.S. Department of Justice. Baer, at a meeting of the New York
State Bar Association on Jan. 30, gave long odds to a regulatory
approval of mergers between any two of the top four wireless
U.S. regulators previously rejected AT&T Inc's $39
billion takeover bid for T-Mobile US in 2011. They have since
argued that T-Mobile US has grown stronger, proving that the
market can sustain four companies.
Additionally, the FCC is under pressure to maximize revenue
from a spectrum auction scheduled for mid-2015. Proceeds from
the auction will be used to compensate broadcasters and to
contribute toward the building of a $7 billion national public
safety communications network.
For the auction, TV stations will voluntarily relinquish
their low-frequency airwaves but their willingness to sell
depends on the prices they can get, a reason for regulators to
seek as many bidders as possible.
Such airwaves can cover greater distances and penetrate
walls and buildings more easily than high frequency spectrum,
which makes them highly coveted, especially by wireless carriers
Sprint and T-Mobile, which have less low-frequency spectrum than
AT&T and Verizon Communications Inc.
Deutsche Telekom would like to sell T-Mobile because it sees
its fourth position in the United States, behind Verizon, AT&T
and Sprint, as limiting long-term profitability. It does not
want a repeat performance of its failed attempt to sell the unit
Deutsche Telekom's new CEO Timotheus Hoettges was a key
negotiator in that deal and knows the risks and costs involved
in a failure better than anyone. He negotiated a breakup fee of
cash and spectrum that amounted to $6 billion, but the company
had to contend with an exodus of customers amid the uncertainty
of waiting for regulatory approval that in the end never came.
To be sure, Son, who once threatened to set himself on fire
as he pushed Japanese regulators to let him set up a high speed
Internet service, has shown he does not give up easily. That is
why people close to Son still have not ruled out the possibility
he will try a merger anyway this year.
One of the sources, who has worked with Son, said he is
learning how U.S. politics work and is still working on making
his case despite the odds.
"He's learning to deal with politics," the person said. "His
English is good but it's not nuanced so he says exactly what he
thinks and that can be challenging in D.C. politics," the person
Softbank's arguments are that a combination of the third and
fourth mobile operators would create a strong competitor to AT&T
and Verizon, the industry leaders.
Looking outside the United States, Son can point to Britain
and Australia as well as his home turf of Japan where regulators
approved mergers between third- and fourth-ranking mobile
Son has also argued that to build the super-fast network he
envisions for the United States, it would only be economically
viable were it to serve a larger subscriber base.
Representatives for Softbank and Sprint have declined to
comment on any potential deal with T-Mobile.