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SoftBank Results Miss Financial Estimates Supporting Sprint For The Long Haul

February 10, 2015 - Written By David Steele

When a business acquires another and writes about cost savings, this usually means by reducing staff or system numbers, because when in simple terms you double the number of customers, you don’t need to double the number of accountants working spreadsheets behind the scenes. However, it takes time to reduce staff numbers: it doesn’t happen overnight. During this time, the new enlarged business typically goes through a period of adjustment as cultures are combined, systems are integrated and some of the cost cutting starts to be at least talked about. Sometimes, when a business has new parents, they’re given an immediate mission to disrupt the rest of the marketplace, which has the side effect of disrupting their business too. This brings us about to Sprint, now owned by Japanese giant SoftBank. It appears that Sprint’s efforts to disrupt the North American market are also causing a little pain for the parent’s business numbers: third quarter operating profit slipped by six percent and undershot analysts’ estimates.

Sprint is currently locked in a price war with T-Mobile US, AT&T and Verizon Wireless. Price wars are often short term, good news for customers (as we tend to pay less for our services during the war), but reduce or even remove profit margins for the competitors. They may also change how the market runs or the established order: Sprint’s price war is to gain customers by undercutting the two larger carriers and going on a localized charm offensive: it’s network plans will see it aiming to offer the best network on a regional basis and using this plus lower prices to lure customers (in many cases, back to Sprint). Fortunately SoftBank understands the position that Sprint is in and support that this is a medium to long term story. Masoyoshi Son, SoftBank Chief Executive, said this on the matter: “Overall, SoftBank is doing well, but with Sprint … being in a tough situation, I think it will have a long battle to fight.”

Another string to Sprint’s comeback bow is the deal to take over up to 1,750 former RadioShack stores. This will significantly increase its retail presence and will keep the carrier in the public’s eye. It’s going to be a long uphill struggle for Sprint and the price war is not set to get any easier with new entrants into the market, such as Google, likely to continue to disrupt things. But this does mean customers can hope to continue to be paying less for cell ‘phone bills for the foreseeable.