Japan’s Softbank (TYO:9984) has paid about US$87m to up its controlling stake in Sprint (NYSE:S) in a further show of confidence for the number four US mobile operator.
The internet giant acquired about 22.9 million shares at a weighted average price…
Japan’s Softbank (TYO:9984) has paid about US$87m to up its controlling stake in Sprint (NYSE:S) in a further show of confidence for the number four US mobile operator.
The internet giant acquired about 22.9 million shares at a weighted average price of US$3.8 each, increasing its ownership by roughly 0.58% to 79.99%. The move helped Sprint’s shares to climb 8.2% to US$4.2 in extended trading yesterday.
It came a week after Softbank announced it would spend up to Y120bn (US$964m) on buying back its own shares, which it said were undervalued because of concerns over Sprint.
The Tokyo-based group did not disclose whether it would continue buying shares in Sprint, but reaffirmed intentions to keep its stake below an 85% threshold that would force it to make a tender offer.
Masayoshi Son, founder and CEO of Softbank and chairman of Sprint, made a rare appearance at the latter’s results call on 4 August to stress his commitment to turning around the telco, rather than selling it.
Softbank followed up with the creation of two finance vehicles, helping Sprint fund network upgrades and device lease payments without adding more debt to its balance sheet.
However, the Wall Street Journal recently reported that in the past year Son and another Softbank executive had floated the idea of selling Sprint to Altice, an acquisitive Luxembourg-based telecoms investment group, and US cableco Comcast.
Softbank has not commented on the speculation but Son did admit on Sprint’s results call that he had lost confidence in the US market last year, when regulators dashed hopes of a merger with T-Mobile US.
Son had wanted to combine the two groups to help take on wireless heavyweights AT&T and Verizon Communications.
Sprint’s infrastructure has struggled after its merger with Nextel Communications in 2005 left it with networks on different technologies. Another network using WiMax technology that it was building with the help of Clearwire, a spectrum-rich telco it bought in 2013, will be shutting down this year.
But the group is confident that a new strategy to densify its existing infrastructure, called Sprint Next Generation Network, will improve speeds and capacity.
Announcing the Sprint stake increase in a stock exchange filing, Softbank said: “The company has dedicated significant resources to optimising Sprint’s network strategy and is supporting the development of innovative lease financing structures. In light of these and other turnaround initiatives, the company is confident in Sprint’s future prospects, and therefore decided to carry out the additional [share] purchases.”
Signs that the US telco’s fortunes could already be starting to turn around came last week when it posted its best churn rate ever at 1.56%, and increased its adjusted EBITDA outlook for 2015 from US$6.5bn-US$6.9bn to US$7.2bn-US$7.6bn.
However, the same results showed it had officially lost its number three position to T-Mobile in subscriber numbers, with 57.7 million customers compared with the latter’s 58.9 million.
Net operating revenues were US$8.03bn for the quarter, down from US$8.8bn at the end of Q1 2014. It posted a loss of US$20m compared with a profit of US$23m for the previous quarter.
Softbank acquired Sprint in 2013 for approximately US$22bn. It has since switched its focus to buying up internet-related companies outside of Japan and the US, including a US$1bn investment in Korea’s largest online retailer Coupang last month. India is of particular interest to the group and it has pledged to spend US$10bn in the country.
