The third largest U.S. national carrier Sprint (S, Financial) has been working to become a stronger wireless player. Softback, the parent of Sprint, has been aggressive to expand the company’s coverage and invest in the Network Vision program to compete with the likes of Verizon (VZ, Financial) and AT&T (T, Financial). The company was also in merger talks with T-Mobile (TMUS, Financial) a few months back, but it did not turn fruitful because of anti-trust issues. However, Sprint had not given up its hope to combine with T-Mobile. But a recent development suggests that the company is possibly not going to approach the fourth largest carrier any further.
Giving up on T-Mobile
According to people close to the matter, Softbank is soon going to downsize its offices in the Silicon Valley and shifting workforce. This is an indication that the company is not going to make further efforts to revive combination discussions with T-Mobile. The company’s offer to purchase T-Mobile fell through in August. Softbank had not expected this to happen.
But resistance from the Federal Communications Commission (FCC) and the Department of Justice was the barrier to the deal. The regulators fear that the combination of Sprint with T-Mobile as it would reduce the number of national carriers from four to three which could be a threat to competition. Sprint was not the only company eying T-Mobile. Dish Network was also in pursuit of T-Mobile, but it did not materialize.
Downsizing office and shifting workforce
Sprint had not ruled out the option of joining forces with T-Mobile completely. But now things seem to be different. Softbank is shifting its workforce out of its West Coast operations. Besides, people familiar with the matter who requested anonymity said that the company’s is also dispersing engineers to its headquarters at Kansas. When Softbank was considering T-Mobile as an acquisition target, the former had sent its employees from Tokyo Kansas to conclude the deal and help in the integration process says the company’s spokesperson Matthew Nicholson. But now, these employees are being sent back.
Besides, Softbank had also taken buildings on lease option to facilitate the combination process. Softbank had opened the office a year earlier in September, right after it concluded its deal with Sprint. In a couple of months, rumors regarding Softbank’s interest in T-Mobile surfaced. When SoftBank CEO Masayoshi Son was questioned about why the company opened an office in Silicon Valley, the CEO highlighted the strategic importance of the place as an IT hub. He also cited that having an office in Silicon Valley, which is closer to Japan, was more convenient than building or leasing one in Sprint’s headquarter in Kansas.
Now the company has plans to rent out one of the buildings which it had taken on lease for an annual cost of $3 million. The building hasn’t been really utilized by the company, and mostly remained vacant. On being asked about Softbank and Sprint’s plan regarding T-Mobile, Nicholson preferred not to comment.
Strengthening the Kansas carrier
Softbank has acquired majority stake in Sprint last year for a value of $22 billion with the view to increase its overseas coverage in the telecommunications market. It gave the company a financial cushioning to speed up its 4G network building process. The company said that its purpose was to widen its international coverage and enter the US market to increase competition in this market which is suffering from virtual duopoly.
But it’s been tougher than what was thought. Competition is also intensifying as T-Mobile is edging closer to surpass Sprint’s customer base through aggressive methods. However, Sprint’s also undertaking bold steps to poach customers from rivals’ network to expand its subscriber base. While the road’s not going to be easy, it would be interesting to watch how Sprint plans to sail through the current challenges.
