Softbank Corp. is planning on investing $16 billion in Sprint Nextel Corp. over the next two years. Softbank president Masayoshi Son reported this information in an interview with Nikkei. This means that the pace of investment at Sprint will more than double. Most of that money will go towards base stations for Sprint’s high-speed LTE network. Softbank’s bid for Sprint was recently approved by the U.S. Federal Communications Commission. Softbank believes that this infrastructure investment will lower costs through economies of scale in terms of network infrastructure and smartphone procurement.
Sprint has been trailing Verizon Wireless and AT&T in terms of subscribers and LTE coverage expansion. As of this past March, Verizon’s LTE network spanned around 491 U.S. markets compared to Sprint’s 88 markets. Son believes that under Softbank, Sprint will be able to catch up to Verizon in terms of high-speed coverage in about tow years.
Softbank made a $21.6 billion takeover bid for Sprint. Of that bid amount, around $5 billion will be used to bolster the company’s balance sheet. Sprint would pay for network investments from their own earnings and would not require any additional funding from Softbank. Softbank and Sprint will open a joint research and development center in California this year or next. The R&D lab will focus on developing new hardware and software. Son wants to employ around 1,000 people at these R&D centers. Sprint would become a U.S. subsidiary of Softbank and will be 78% owned by them.
Son will become the chair of the new Sprint board of directors. Ronald Fisher, the head of Softbank’s U.S. operations, will become deputy chairman. Four Sprint directors including CEO Dan Hesse will stay on the board and will be joined by Michael Mullen (former chairman of the U.S. Joint Chiefs of Staff). Softbank and Sprint’s executives will also meet once per month to set common business goals for the companies in the U.S. and Japan.