Corporate takeovers are not always simple, acquiring a complete business and amalgamating it with your own existing business. In some cases, the company buying has to undergo a long transition process. In other cases, a business is bought as a going concern and allowed to run independently, although in these cases what usually happens is that the buyer installs one or more Main Board Directors so that it is able to influence the bought business and move it into alignment with its own objectives and requirements. In the case of SoftBank and US carrier, Sprint, when SoftBank bought Sprint they didn’t completely buy the business but instead they bought 70% of the US carrier. This gave them effectively full control over the carrier but is some 15% shy of the 85% ownership, at which point investors start to ask if the business is effectively privately owned and should be delisted.
Since the takeover in late 2012, Sprint have endured a difficult time thanks to market and network pressures. The business has announced a number of changes and initiatives designed to turn the business around. These include network improvements to utilize all of Sprint’s spectrum, plus competitive pricing and special offers, such as half price tablets. The business has also cut operating costs, which boosts earnings although the business is still making a loss as a going concern. Despite these changes and gains in subscriber numbers, Sprint has very recently dropped behind T-Mobile US and is now the fourth largest carrier in the US. However, SoftBank’s owner, Masayoshi Son, has publicly stated that he can see “light at the end of the tunnel” for Sprint, even if he has conceded that the recovery may take two years. With this in mind, SoftBank has increased its stake in Sprint, taking advantage in share price weakness, and over the last few days has purchased another 10% of the business and bringing the holding up to 80%. Marcelo Claure, Sprint’s Chief Executive Officer, said this on the purchase: “If they believe Sprint stock is highly undervalued, they will continue to invest in Sprint… We are on the verge of a massive Sprint turnaround, and we feel very good about our prospects.”
SoftBank, of course, can afford to take a longer term view of matters, having already spent a considerable sum of money on the US carrier. Sprint has significant potential but faces a stiff headwind. If the carrier can get its act together and effectively use the spectrum it has, this should be very good news for the business.