Soft landing for Sprint has implications for US wholesale

21 September 2012 | Judy Reed Smith


Seismic shifts are reshaping the stateside wireless space for 2013. Following the 2011 regulatory complications that caused AT&T to withdraw its bid for T-Mobile, the pattern of the still-expanding stateside mobile data market is pulling companies into position to deliver competition to the two US giants AT&T and Verizon.

The latest development comes as Asian entrepreneur Masayoshi Son, chief executive of Softbank, also wants a piece of the Stateside mobile pie. His $3.1 billion investment for a dominant share position in Sprint, although set to close in 2013, already has sent Sprint out shopping for expansion opportunities. 

Driven by a goal to grow market share, Sprint picked up 585,000 new customers, plus valuable spectrum, from US Cellular for $480 million. These transactions require regulatory approval and won’t close until some time in 2013, but Sprint hopes the deal’s momentum will lift its stock and attract new customers. While most onlookers are consumed with the retail ramifications of this deal, it will impact the US wholesale market as well. Here are some trends to watch for:

Strong and independent

After years of acquisition rumours, this deal will stabilise Sprint’s position as the third largest player in the US, as well as tied with AT&T for third largest in the world after China Mobile and Verizon. This more significant company is positioned with its own network from which to buy and sell more wholesale services, in the US and Asia.

The need for speed

For years, Americans have yearned for the types of data speeds (and pricing for those speeds) available in Japan. My research firm has long noted that the thirst for ever-faster connection speed, whether wired or wireless, is virtually unquenchable, because it enables bigger and better apps. Softbank hopes to capture market share by pushing US services in Japan’s direction – a play that translates to the development of a robust network built out significantly from today’s iDEN and 3G versions. 

Tipping the scales

When AT&T was pursuing the acquisition of T-Mobile, Sprint CEO Dan Hesse argued the deal would give AT&T too much scale-driven power in network equipment and handset (read: smart device) purchasing transactions. This deal will deliver to Sprint its own significant boost in purchasing power. For example, even though Sprint clearly stated that it will not accelerate the speed of its planned build due to this influx of capital, any company would be likely to renegotiate more networks contracted for less per site or mile once a deal like this has been closed.

More acquisitions

The deal’s largest impact on the wholesale space may lay in other deals this transaction puts in play, such as the US Cellular deal or the possibility of buying out the shares of Sprint partner Clearwire. Dan Hesse has done an impressive job of keeping Sprint strong enough to remain on its own, execute a successful turnaround following the problematic Nextel deal, and attract significant investment from world-class partner. In his new role of CEO, he will need to spend this money wisely so that it meets Masaoshi Son’s expectations for a killer position in the stateside market.