March 26, 2023

DealBook: Sprint Says It Is in Negotiations With SoftBank of Japan

9:47 p.m. | Updated

Two giants overwhelmingly dominate the wireless market in the United States. Now a merger deal is in the works that could produce a robust challenger.

Sprint Nextel said Thursday that it was in discussions with SoftBank over a “potential substantial investment.” The talks, which began this summer, center on SoftBank, a Japanese telecommunications company, paying $12.5 billion for a stake of about 70 percent in Sprint, according to a person briefed on the matter who was not authorized to speak publicly. The talks emerged just a week after Deutsche Telekom, the parent of T-Mobile USA, announced a reverse takeover of another smaller company in cellphone service, MetroPCS. The spate of deal-making is aimed at shifting the balance of power in a United States market largely controlled by Verizon Wireless and ATT. They have more than 200 million customers — more than their next six competitors combined.

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As the No. 3 cellphone service provider, Sprint, with more than 56 million subscribers, has long struggled to catch up. In recent years, it has sought to compete primarily on price. But the T-Mobile-MetroPCS merger could create a tougher competitor in the lower end of the cellphone market.

Sprint Nextel

While Sprint has committed billions of dollars to revamping its infrastructure, hoping to develop a Long Term Evolution high-speed network, it has been constrained by limited financial resources. Sprint carried nearly $21 billion in long-term debt as of June 30, and it has lost money every year since 2007.

A deal with SoftBank would promise to provide Sprint with substantial financial power. SoftBank, one of Japan’s largest cellphone service providers, could supply additional resources for Sprint to develop its next-generation network.

The combined company could subsequently consider other deals, possibly including a takeover of Clearwire, a wireless services provider of which Sprint owns a significant stake. Shares of Clearwire jumped nearly 71 percent Thursday on that prospect. And a stronger Sprint could make a run at a merged MetroPCS-T-Mobile. Sprint nearly acquired MetroPCS this year, but its board vetoed the deal as too expensive.

The person briefed on the matter said Thursday that SoftBank and Sprint are focused on their own deal now.

Buying Sprint would give SoftBank an entry into the American market, one of the largest and most profitable in the world.

Chetan Sharma, an independent telecommunications analyst, said a deal between Sprint and SoftBank would probably give SoftBank control over the broad direction of Sprint. SoftBank could influence how Sprint deploys network upgrades or adds services for customers, he said. But a deal would not necessarily accelerate Sprint’s deployment of L.T.E., the fourth-generation cellular network, because Sprint is already on track to expand its newer network aggressively by the end of 2013, Mr. Sharma said.

The more likely result that Sprint customers can expect is new services. Japanese and South Korean carriers are leading the way with innovative mobile services, he said, including mobile payments and analytics that look at a customer’s personal data to provide better map directions or recommendations for things to buy. Such services could open doors to new methods of mobile advertising for Sprint, he said.

“Things that Google and Apple are trying to do here, operators are doing in those countries,” Mr. Sharma said.

A representative of SoftBank was not available for comment.

With a brief statement on Thursday, Sprint confirmed the talks, which had been reported by the Nikkei newspaper of Japan. “Although there can be no assurances that these discussions will result in any transaction or on what terms any transaction may occur, such a transaction could involve a change of control of Sprint,” the statement said.

Shares of Sprint surged more than 14 percent in heavy trading Thursday. But SoftBank’s shares fell more than 15 percent in early trading in Tokyo on Friday.

Under the current outlines of the deal, Sprint would first issue new shares to SoftBank. That would be followed by a tender offer for Sprint’s shares, until the Japanese company reached its 70 percent target holding.

SoftBank is still lining up financing from banks, and any deal is not expected to be announced for several days at least, the person briefed on the matter said.

In pursuing Sprint, SoftBank may see an opportunity to again reshape a country’s cellphone market. The company, founded by the Internet entrepreneur Masayoshi Son, moved into wireless service in 2006 when it acquired Vodafone’s operations in Japan, putting it behind two bigger and more established rivals.

Through a combination of offering attractive devices like the iPhone and faster data networks, as well as by acquisitions, it climbed up the ranks of the Japanese market. Craig Moffett, an analyst with Sanford C. Bernstein, said it was too early to draw conclusions about the meaning of a deal between Sprint and SoftBank. He said a majority investment from SoftBank would just be an effort to scoop up spectrum, the radio waves that carry wireless services, as if it were real estate. Still, it made little sense, he said.

“There are no synergies whatsoever in a Japanese company buying a U.S. telecom operator,” he said. “This is tantamount to Japanese buyers buying Rockefeller Center.”

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Workers’ Own Cellphones and iPads Find a Role at the Office

SAN FRANCISCO — Throughout the information age, the corporate I.T. department has stood at the chokepoint of office technology with a firm hand on what equipment and software employees use in the workplace.

They are now in retreat. Employees are bringing in the technology they use at home and demanding the I.T. department accommodate them. The I.T. department often complies.

Some companies have even surrendered to what is being called the consumerization of I.T. At Kraft Foods, the I.T. department’s involvement in choosing technology for employees is limited to handing out a stipend. Employees use the money to buy whatever laptop they want from Best Buy, or the local Apple store.

“We heard from people saying, ‘How come I have better equipment at home?’ ” said Mike Cunningham, chief technology officer for Kraft Foods. “We said, hey, we can address that.”

Encouraging employees to buy their own laptops, or bring their mobile phones and iPads from home, is gaining traction in the workplace. A survey published on Thursday by Forrester Research found that 48 percent of information workers buy smartphones for work without considering what their I.T. department supports. By being more flexible, companies are hoping that workers will be more comfortable with their devices and therefore more productive.

“Bring your own device” policies, as they are called, are also shifting the balance of power among electronics makers. Manufacturers good at selling to consumers are increasingly gaining the upper hand, while those focused on bulk corporate sales are slipping.

The phenomenon is upending the corporate market, which has traditionally hinged on electronics makers cultivating tight relationships with I.T. departments. Dell, Hewlett-Packard and Research in Motion, maker of the BlackBerry, have long dominated the workplace, but Apple and its consumer-friendly blockbusters — the iPhone, iPad and MacBook — have made major inroads.

It’s not just electronics. A variety of online services that were originally aimed at consumers are crossing over. Google is hoping that people using its Gmail and Google Docs products will produce a guerrilla movement inside corporations strong enough to displace Microsoft and its Office suite of software.

Skype, the Internet calling service that started as a way to call friends at no charge, is pushing into the workplace. Dropbox, originally pitched as a way for people to store and share personal documents online, has also gained a foothold in businesses.

“You shouldn’t reject things that make employees more productive, and if those things happen to be consumer technologies, so be it,” said Ted Schadler, an analyst with Forrester Research.

Corporate I.T. departments often resist allowing consumer technology on their networks because of security concerns. Adding a hodgepodge of devices and services also complicates their job.

But I.T. departments are gradually warming to the idea simply because their bosses left them little choice. The I.T. staff may grieve for their lost power, but they do it.

“They’re over the denial and anger stage, and now they are in the acceptance and ‘How can we help?’ stage,” said Mr. Schadler, who co-wrote the book “Empowered,” which addresses consumer technology in the workplace. “What broke the camel’s back was the iPad, because executives brought it into the company and said ‘Hey, you’ve got to support this.’ ”

A survey of more than 1,700 information workers earlier this year by Forrester showed how much of the equipment-buying decision rests with employees. Nearly half of the respondents said that they bought their work smartphone while 41 percent said their employer paid; 9 percent said the cost was shared between the two.

Netflix’s “bring your own device” policy takes into account the blurring of the lines between work and personal time.

“As long as they’re productive, innovative and engaged, we’re happy,” said Steve Swasey, a spokesman for Netflix. Kraft Foods’ “bring your own laptop” policy started a year and half ago, and now around 800 employees receive a stipend — Kraft declined to say how much — to buy either a Windows or Mac computer. Workers who want laptops that cost more than their stipend must pay for the difference out of their own pockets.

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