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SoftBank Hopes Trump Connection Reopens Doors for Sprint
DOW JONES & COMPANY, INC. 3:15 PM ET 12/30/2016
The last time Sprint Corp. Chairman Masayoshi Son wanted something from U.S. telecom regulators, it didn’t go so well. Now, with power changing in Washington, the Japanese mogul sees an opportunity.
Mr. Son, sometimes called the Bill Gates of Japan, got a frosty reception from regulators in 2014 when he sought to merge Sprint with rival T-Mobile US Inc., leading him to abandon a deal that had been a key part of why he decided to buy Sprint a year earlier.
Now, the 59-year-old deal maker has found a way to get close to President-elect Donald Trump by pledging to invest $50 billion and create 50,000 jobs in the U.S. That has helped Mr. Trump say he is fulfilling a key promise of his campaign, culminating with Wednesday’s announcement that Sprint was planning to create 5,000 jobs and that a satellite company Mr. Son invested in would bring another 3,000 jobs to the U.S.
“It was done through Masa, a terrific guy, and we appreciate it,” Mr. Trump said outside his home in Palm Beach, Fla., using Mr. Son’s nickname.
Generating goodwill at the highest level in the White House could reap rewards for Sprint and its parent SoftBank as they pursue bigger U.S. ambitions. As president, Mr. Trump will appoint the head of the agency that regulates and approves mergers in the telecom industry. He also names the heads of agencies that scrutinize foreign investments in U.S. businesses, known as CFIUS.
Telecom executives have voiced optimism that a Trump administration could be more open to consolidation, raising the question of whether Mr. Son might rekindle a merger with T-Mobile as a way to help the carrier better compete against the top two wireless operators, AT&T Inc. and Verizon Communications Inc.
But several people close to Mr. Son say there has been no work on a new T-Mobile deal, though they didn’t rule it out as a future possibility. For now, they say, Mr. Son is just trying to find a way to get on Mr. Trump’s good side.
“What do you got to lose, right?” one of the people said. Mr. Trump “couldn’t be less open than what we got.”
Ahead of a meeting in Trump Tower this month, Mr. Son told advisers he would tell the president-elect how in 2014 he wanted to invest in U.S. broadband and create jobs by acquiring T-Mobile, but that he was thwarted by unwelcoming regulators, according to a person familiar with the matter. As a result, Mr. Son said he started investing in companies outside the U.S.
Mr. Son’s advisers said the reception he received from Mr. Trump was much warmer than the one he got from Federal Communications Commission Chairman Tom Wheeler, who is ardently opposed to further consolidation in a wireless sector dominated by the four biggest carriers. Mr. Son wasn’t planning to specifically discuss a future T-Mobile acquisition with Mr. Trump, Mr. Son’s advisers said.
Details of what the two men ended up discussing at the meeting couldn’t be learned.
After dropping the T-Mobile bid in 2014, a dejected Mr. Son considered selling Sprint, but he said he couldn’t find any buyers. Instead, he refocused himself on improving the carrier, which was facing subscriber losses, a heavy debt load and eight years of annual losses.
He brought in a new CEO, Marcelo Claure, who is leading turnaround efforts by changing Sprint’s marketing and pricing plans and cutting billions of dollars in annual expenses. Changes under Mr. Claure also included moving some call-center and customer-service jobs to overseas vendors, and using Sprint handset leases, network equipment and wireless airwaves as collateral for cheaper loans to finance operations.
That work is showing signs of paying off. The carrier has added more than half a million of the most lucrative type of monthly subscribers this year. It has also reduced customer defections and won some network performance awards. Revenue has ticked up as well.
Sprint hasn’t focused on doing deals. In late November, Chief Financial Officer Tarek Robbiati said the company needed to improve its own business before thinking about consolidation. “I don’t wait for a change in the administration to think about M&A,” Mr. Robbiati said.
In his approach to Mr. Trump, Mr. Son repackaged some of the company’s existing efforts as a new wave of investing in America. While some call-center jobs will return to the U.S., many of the jobs are part of a plan Sprint announced earlier this year to open new stores. The $50 billion investment will also be coming from a fund Mr. Son set up earlier this year with the Saudi Arabian government.
In a 2014 speech, Mr. Son said he is motivated to invest in the U.S. because of a desire to give back. The billionaire grew up a poor ethnic Korean in Japan and said he struggled with discrimination and even contemplated suicide. At 16, Mr. Son moved to California where he attended college.
“My eyes got wide open,” he said of his time in the U.S., noting how he was particularly impressed with how people of different races were “treated very fairly, very equally.”
“I love America,” he said, standing in front of a giant American flag. “This is a beautiful country.”
Write to Ryan Knutson at ryan.knutson@wsj.com