SoftBank’s Purchase Of ARM Highlights Confidence In Sprint

Japanese business, SoftBank, currently owns a fairly substantial stake in the fourth largest US carrier, Sprint. Today, SoftBank announced it was to purchase British company, ARM Holdings, in a deal valued at $32.1 billion. This is a significant move in the market as it represents the largest acquisition of a European technology business. ARM Holdings' significance is that the company licences chipsets that power 95% of today's smartphones, a number that could continue given that Intel is quitting the smartphone System-on-Chip market. ARM Holdings licence products to all of the major market players including Apple and Samsung, which develop their own chipsets using custom ARM processor cores (and in the case of Samsung, use ARM's reference processor core designs too). However, whilst ARM technology powers most of today's smartphones, SoftBank's purchase of the British company is more related to the Internet of Things (or IoT) rather than the smartphone market, which is showing signs of declining. IoT here means the billions of smart and interconnected devices that will make our life easier in the coming years in ways such as smart cities, reactive energy management systems and a fridge that realizes you are low on milk and automatically orders more.

However, it is not clear what today's announcement will mean for Sprint. This time last year, Sprint was the third largest US carrier but T-Mobile US overtook the business based on subscriber numbers. SoftBank's President and Chief Executive Officer, Masayoshi Son, believes in a turnaround at Sprint despite the carrier reporting ongoing and deepening losses: it reported a loss of $554 million during the first quarter of 2016, more than doubling the loss reported in the first quarter of 2015. Masayoshi's confidence in Sprint is such that he is happy to spend $32 billion on another acquisition rather than keep this capital to support the struggling carrier. However, it could reduce the chances of a merger between Sprint and T-Mobile US, which although quashed some time ago has remained as a persistent rumor. It could reduce the opportunity of such a merger simply because SoftBank may have less cash to funnel into such an arrangement. Another home for the cash might be bolstering Sprint's network, although the carrier has announced that it is working to build a smarter (rather than simply more capacious) network, keen to use its significant 2,500 MHz spectrum and using technologies that could be employed in fifth generation (5G) networks.

There has been a number of interesting observations made following the announcement. One is that SoftBank's approach to ARM Holdings happened after the United Kingdom voted to leave the European Union. On this, Masayoshi said: "Brexit didn't affect my decision... I would have made this decision, at this time, with or without Brexit."

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