Is SoftBank’s Masayoshi Son Eyeing Vodafone?
http://blogs.wsj.com/digits/2014/09/03/is-softbanks-son-eyeing-vodafone/?mod=yahoo_hs Very Interesting!! 
Having seen his long pursuit of T-Mobile US TMUS +0.16% collapse, is SoftBank 9984.TO -0.40% Chief Executive Masayoshi Son turning his gaze to Europe, and specifically to Vodafone Group VOD.LN +0.38%?
Citing an unnamed SoftBank official, a Japanese press report Tuesday speculated that Softbank may approach the Newbury, England-based mobile giant—the world’s second-largest wireless operator by subscribers after China Mobile.
SoftBank has history with Vodafone. The Japanese Internet and telecommunications conglomerate acquired Vodafone’s Japanese operations in 2006 for $15 billion. By 2012, Vodafone sold back to SoftBank $5 billion-worth of interests from that transaction, as the British company pared minority interests from its worldwide footprint.
Meanwhile, SoftBank used the deal to transform itself from an Internet provider into Japan’s third-largest cellphone carrier. “What SoftBank talks about is how much it has improved [Vodafone’s Japanese operations],” says Enders Analysis’s James Barford.
Talk of a combination between the two has swirled since last year, after the British operator’s valuation halved in size following the sale of its 45% stake in Verizon Wireless to U.S. counterpart Verizon Communications VZ +0.22% for $130 billion. SoftBank has also come into focus after U.S. telecom giant AT&T T +0.37%, long tipped as a Vodafone predator, struck a $49 billion deal last May for satellite-television provider DirecTV DTV -0.23% to create a pay-television and wireless-phone titan.
Buying Vodafone could make sense for SoftBank as it chases scale and network improvements, said an analyst who didn’t wish to be identified. “[SoftBank has] set targets to become the largest company in the world, which is something that requires the ‘big thing’ to be added to them, which Vodafone would be.”
Vodafone’s 2600 Megahertz radio spectrum assets would also be attractive to SoftBank given its focus on using the same frequency band across Japan and the U.S. for fourth-generation wireless technology, the analyst added.
And the anemic state of the European wireless telecoms sector may be seen a buying opportunity. Under-modernized networks, tough price competition, stringent regulation and depressed consumer sentiment across debt-ridden economies are combining to lower revenues for Europe’s telecom players. A scattered industry has led to a consolidation race, including for Vodafone which has spent tens of billions of dollars on assets in Germany and Spain to shore up its ailing European businesses.
Vodafone, the world’s second-largest wireless operator by subscriber numbers.
Agence France-Presse/Getty Images
Last month, asked how attractive he thought the European telecom market is, Son teased with his answer. “On the one hand, Europe is a crowded and competitive market. On the other hand, the network is poor. I won’t say anything more.”
SoftBank wasn’t immediately available to comment on the Vodafone rumor. Vodafone declined to comment.
Still, most observers are skeptical.
In the U.S., SoftBank wanted to combine its Sprint S +1.81% unit with Deustche Telekom AG’s T-Mobile US unit, merging the third- and fourth-largest mobile carriers, but a deal foundered last month on stiff opposition from regulators. Taking on Vodafone would be a different proposition far removed from the challenger telecom position favored by SoftBank, noted Enders Analysis’s Barford.
“Vodafone in Europe is essentially an incumbent,” he says. “You couldn’t apply the Softbank Japan model to Europe; it doesn’t work in the same way as applying the Japan Softbank model to the U.S.”
As in-market consolidation is the U.S. is not possible for Softbank, the company may consider looking internationally. However, Softbank would have to show that it can implement a strategy that works in Europe, where operators have struggled to monetize their assets, said Moody’s analyst Ivan Palacios.
The size of deal required to snaffle Vodafone, potentially valued at $100 billion, would also be hard for SoftBank to digest. Viewed as highly leveraged, SoftBank last October paid $1.26 billion for a majority stake in wireless distributor Brightstar.
“We are not convinced that there is either the desire or ability at this point to pursue an acquisition of this size by Softbank,” said Rick Mattila, analyst at Mitsubishi UFJ Securities. “It would require a strategic re-alignment away from Internet assets and that would seem to go against recent moves.”
“[SoftBank has their] hands pretty full with Sprint. To try and do Vodafone as well [would be difficult]. Maybe not never, but probably not now,” said the unnamed analyst.
Palacios also said SoftBank’s financial flexibility is “not unlimited,” and that “Vodafone would be a large asset to digest and Softbank already has some debt on its balance sheet, especially after taking over Sprint.”
The only way SoftBank could fund the deal would be by selling its sizeable stake in Alibaba, with the added difficulty of the Chinese e-commerce website’s forthcoming listing, said Mattila.
“Softbank owns around a third of Alibaba and the stake could in theory be worth around $60 billion,” he said. “However, in the past Mr. Son has been clear that there is no intention to sell that stake.”
Rather than a takeover, it is more likely for SoftBank and Vodafone to form a strategic alliance, Mattila said.
Citing an unnamed SoftBank official, a Japanese press report Tuesday speculated that Softbank may approach the Newbury, England-based mobile giant—the world’s second-largest wireless operator by subscribers after China Mobile.
SoftBank has history with Vodafone. The Japanese Internet and telecommunications conglomerate acquired Vodafone’s Japanese operations in 2006 for $15 billion. By 2012, Vodafone sold back to SoftBank $5 billion-worth of interests from that transaction, as the British company pared minority interests from its worldwide footprint.
Meanwhile, SoftBank used the deal to transform itself from an Internet provider into Japan’s third-largest cellphone carrier. “What SoftBank talks about is how much it has improved [Vodafone’s Japanese operations],” says Enders Analysis’s James Barford.
Talk of a combination between the two has swirled since last year, after the British operator’s valuation halved in size following the sale of its 45% stake in Verizon Wireless to U.S. counterpart Verizon Communications VZ +0.22% for $130 billion. SoftBank has also come into focus after U.S. telecom giant AT&T T +0.37%, long tipped as a Vodafone predator, struck a $49 billion deal last May for satellite-television provider DirecTV DTV -0.23% to create a pay-television and wireless-phone titan.
Buying Vodafone could make sense for SoftBank as it chases scale and network improvements, said an analyst who didn’t wish to be identified. “[SoftBank has] set targets to become the largest company in the world, which is something that requires the ‘big thing’ to be added to them, which Vodafone would be.”
Vodafone’s 2600 Megahertz radio spectrum assets would also be attractive to SoftBank given its focus on using the same frequency band across Japan and the U.S. for fourth-generation wireless technology, the analyst added.
And the anemic state of the European wireless telecoms sector may be seen a buying opportunity. Under-modernized networks, tough price competition, stringent regulation and depressed consumer sentiment across debt-ridden economies are combining to lower revenues for Europe’s telecom players. A scattered industry has led to a consolidation race, including for Vodafone which has spent tens of billions of dollars on assets in Germany and Spain to shore up its ailing European businesses.
Vodafone, the world’s second-largest wireless operator by subscriber numbers.
Agence France-Presse/Getty Images
Last month, asked how attractive he thought the European telecom market is, Son teased with his answer. “On the one hand, Europe is a crowded and competitive market. On the other hand, the network is poor. I won’t say anything more.”
SoftBank wasn’t immediately available to comment on the Vodafone rumor. Vodafone declined to comment.
Still, most observers are skeptical.
In the U.S., SoftBank wanted to combine its Sprint S +1.81% unit with Deustche Telekom AG’s T-Mobile US unit, merging the third- and fourth-largest mobile carriers, but a deal foundered last month on stiff opposition from regulators. Taking on Vodafone would be a different proposition far removed from the challenger telecom position favored by SoftBank, noted Enders Analysis’s Barford.
“Vodafone in Europe is essentially an incumbent,” he says. “You couldn’t apply the Softbank Japan model to Europe; it doesn’t work in the same way as applying the Japan Softbank model to the U.S.”
As in-market consolidation is the U.S. is not possible for Softbank, the company may consider looking internationally. However, Softbank would have to show that it can implement a strategy that works in Europe, where operators have struggled to monetize their assets, said Moody’s analyst Ivan Palacios.
The size of deal required to snaffle Vodafone, potentially valued at $100 billion, would also be hard for SoftBank to digest. Viewed as highly leveraged, SoftBank last October paid $1.26 billion for a majority stake in wireless distributor Brightstar.
“We are not convinced that there is either the desire or ability at this point to pursue an acquisition of this size by Softbank,” said Rick Mattila, analyst at Mitsubishi UFJ Securities. “It would require a strategic re-alignment away from Internet assets and that would seem to go against recent moves.”
“[SoftBank has their] hands pretty full with Sprint. To try and do Vodafone as well [would be difficult]. Maybe not never, but probably not now,” said the unnamed analyst.
Palacios also said SoftBank’s financial flexibility is “not unlimited,” and that “Vodafone would be a large asset to digest and Softbank already has some debt on its balance sheet, especially after taking over Sprint.”
The only way SoftBank could fund the deal would be by selling its sizeable stake in Alibaba, with the added difficulty of the Chinese e-commerce website’s forthcoming listing, said Mattila.
“Softbank owns around a third of Alibaba and the stake could in theory be worth around $60 billion,” he said. “However, in the past Mr. Son has been clear that there is no intention to sell that stake.”
Rather than a takeover, it is more likely for SoftBank and Vodafone to form a strategic alliance, Mattila said.
