SOFTBANK, MASAYOSHI SON---THE JAPANESE BILL GATES---AND HIS $20 BILLION SPRINT DEAL

SOFTBANK

null
Parody of Softbank ad
Softbank is Japan’s third-biggest telecoms operator. Based in Tokyo, it has the country’s most popular search engine and e-commerce site. It also runs the fastest-growing mobile phone carrier in Japan and operates its largest broadband network. Softbank is also the sole Japanese carrier for the Apple iPhone; in addition it is the only company providing data service for the iPad. But Softbank’s most promising ventures are in China, where it has made a series of strategic investments in some of the country’s most prominent Internet companies. [Source: Hiroko Tabuchi, New York Times, May 30, 2010]

As of January 2007 it had 15.6 million subscribers and a 17 percent share of the market. Softbank was No. 1 in new subscriptions in 2008 with a net increase of 2.046,700 new subscriptions. Softbank is the parent company of Japan’s third largest cell phone company and the owner of 41 percent of Japan’s largest online media business, Yahoo Japan Corp.

Softbank made a group net profit of about $2.2 billion in fiscal 2010-2011, nearly double what it made the previous year, on revenues of $36 billion. The increase was largely due to strong earnings from its mobile phone service. In fiscal 2009-2010 Softbank more than doubled its net profit to 96.72 billion yen ($1.04 billion), driven by strong performance in its mobile business, while operating profit soared 20 percent to a record 465.9 billion yen.

Masayoshi Son, the Japanese Bill Gates

null
Son with Apple's Steven Jobs
Masayoshi Son, who is sometimes called the Japanese Bill Gates, was the richest man in Asia and the 8th richest man in the world in 2000, with a net worth of $17 billion, but his net wealth plummeted after the bursting the Internet bubble in 2000 to $5.6 billion and $1.1 billion in 2002, when he was world’s 386th richest man.

Son is owner of Softbank, a conglomerate that is invested in Internet and E-business enterprises all over the world. Unassuming and balding, he look more like a salaryman than a high-tech mogul. Son was ranked the second wealthiest person in Japan by Forbes in August 2007 with a net worth of $5.45 billion. He was first in 2006. He was once worth $76 billion during the dot.com boom.

Softbank’s hard-charging leader, Satoshi Son, is a rare, self-made business leader in a land of follow-the-leader salarymen and tody bureaucrats. He is famous for his 19-hour workdays and was so engaged in one deal he almost missed his own wedding. According to The Economist: Son is the nearest thing the country has to American tech bosses such as Bill Gates and Steve Jobs (who are his long-time friends and business partners). His brashness means he is less welcome in some Japanese circles than a man whose worth is estimated at $8 billion might expect to be. He is used to being an outsider. Although his family has lived in Japan for two generations, he is of Korean-Chinese descent, and has thus had to suffer having doors slammed in his face.” [Source: The Economist, November 25, 2010]

Masayoshi Son’s Life

Son was born in Kyushu to Korean immigrants. Koreans are discriminated against in Japan and Son endured his share of taunting and bullying when he was in school. He built up his strength by putting metal weights in his shoes and moved to the United States while still in his school.

Son insisted on using his Korean family name rather than Yasumoto, the Japanese name his parents had taken. Because of his Korean ancestry Son was not considered a Japanese citizen. He eventually was granted citizenship based on the fact that his wife had changed her name to Son and if one Japanese person has the last name of Son then it must be a Japanese last name.

At 16 he moved to America to finish high school; he then studied at Berkeley, which in the late 1970s was abuzz with the silicon revolution. Mr Son says he vowed to devise one computer-related business idea each day. At Berkeley, he imported electronic arcade machines from Japan and made his first $1 million designing the software for Sharp's electronic translator and organizer, the Wizard.

Masayoshi Son and Softbank

Kon set up Softbank in the 1981, initially as a software distributor. Soon it became a vehicle to take stakes in American information-technology firms that were entering Japan. Mr Son acquired nearly 40 percent of Yahoo! when it was still a tiny operation, along with a gaggle of other dotcoms. By the late 1990s his firm was worth $180 billion. But the dotcom crash wiped out 98 percent of its market value (and Mr Son’s wealth). [Source: The Economist, November 25, 2010]

Since then he has resurrected the company by buying telecoms businesses, emerging as the most feared competitor of NTT, the dominant, formerly state-owned telecoms operator. To get there he took on heroic amounts of debt and braved criticism over the accounting policies he adopted at the firms he acquired.

Somewhat optimistically, The Economist reported, Mr Son has a 300-year plan for Softbank (by the end of which time he expects people to communicate by telepathy and live to 200). Earlier this year he invited contenders from inside and outside the company to apply to be his successor (4,000 did so), although the 53-year-old does not plan to step down for at least a decade. Thirty years from now Mr Son wants Softbank to be one of the world’s top ten firms, valued at around $2 trillion. The open recruitment is an acknowledgment that Softbank has become big---and that he wants to keep it entrepreneurial, so it doesn’t end up a timid plodder like so many other firms in Japan. [Source: The Economist, November 25, 2010]

Early History of Softbank

Son founded Softbank in Tokyo in 1981. According to legend his first two employees quit after he stepped on a crate and began ranting how his company was going to dominate the PC industry w. Within a decade it became Japan's leading software distributor.

In the 1990s he began conquering the E-business world with billions of dollars lent him by Japanese bankers looking for new investment opportunities and made billions when the stocks of the companies he invested in went through the roof during the Internet boom. At that time Softbank had stakes in more e-businesses in more countries than any other business. In 2000, it had invested in 600 enterprises in 130 countries and had a stunning market capitalization of $184 billion.

In the late 1990s Softbank controlled 50 percent of the software distribution market in Japan and 85 percent of Japan's web traffic; had a 21 percent stake in Yahoo; and owned the rights to Comdex, the world leading computer exhibition. It also helped create the stock market Nasdaq Japan.

In the United States, Softbank had stakes in PeoplePC (a $25-a-month service that gives people a free computer and online access), E-Loan, online grocer Webvan, Global Sports, E*Trade, and Buy.Com. It once owned much of Ziff-Davis, the publisher of popular computer magazines like PC Magazine and PC Computing, but sold it. In Europe, Softbank started joint ventures with France’s Vivendi and Rupert Murdoch's News Corporation.

Decline and Rebirth of Softbank

Softbank and Son were hit hard by the Internet crash. Softbank shares plummeted in value from $590 to $34 and the company’s market capitalization shrunk from $180 billion to $21 billion after the bursting the Internet bubble in 2000.

Son didn’t give up and was quick to take advantage of new opportunities. In 2001, he so desperately wanted access to new high-speed Internet lines he burst into the office of an official in Japan’s telecommunications ministry with a cheap lighter and shouted, “If you don’t help me, I’m going to pour gasoline all over myself right here and set myself on fire with this $1 lighter. The official gave into his demand and helped him start up a high-speed Internet service.. [Source: Wall Street Journal]

Son’s audacious move helped him get Yahoo BB going and helped propel Japan into a world leader in Internet broadband services. Son owns 4 percent of Yahoo Inc. Yahoo Inc and Softbank own most of Yahoo BB, the leader in the broadband Internet market.

Masayoshi Son’s Business Skill

Hiroko Tabuchi wrote in the New York Times, An early investor in Yahoo, “Mr. Son transformed the Yahoo engine, making it Japan’s most recognized Web portal packed with music, games and other content that went beyond a simple search for information. In 2006, Mr. Son borrowed heavily to buy the British network Vodafone’s troubled operations in Japan, turning around that business with marketing acumen and aggressive pricing. Then Mr. Son brought together the many parts of his business; for example, handsets that run on Softbank’s cellphone network in Japan now come with a button that lets users jump directly to Yahoo Japan’s mobile site, bolstering the search engine’s visitor numbers.” [Source: Hiroko Tabuchi, New York Times, May 30, 2010]

When the Internal Affairs and Communications Ministry adopted a plan to provide households across the nation with fiber-optic broadband cable services, Son urged NTT Corp. to form a fiber-optic network business offshoot. Although NTT's fiber-optic division was not spun off to form a new company, the company was forced to lower the interconnection charges to lend its fiber-optic network to other companies.

“Still, the company faces challenges. hough Softbank’s interests in China are promising, “revenue streams are mostly still in the future,” said Nathan Ramler, a technology analyst for Macquarie in Tokyo. Mr. Ramler said he was also interested in seeing how Mr. Son would make money from some of his latest ideas---like linking Softbank cellphones to Twitter. Softbank’s cutting-edge businesses also make them inherently risky, Mr. Ramler said. “The rate of change and possibility that a new idea could come along and undercut existing business models is always going to be a risk,” he said.

Yahoo Japan

Yahoo Japan is 40 percent owned by Softbank and 35 percent owned by Yahoo.

In April 2010, Yahoo Japan and Google formed a partnership---with Yahoo Japan switching to Google’s search engine in return for Yahoo Japan providing Google with data in online shopping and auction trends--- giving Google 90 percent of the Internet search engine market in Japan. The move was seen as a blow to Microsoft which was hoping that Yahoo Japan would use its search engine Bing. The deal was approved by Japan’s Fair Trade Commission in December 2010, dismissing concerns by some lawmakers and Internet companies like Rakuten over the deal.

Yahoo Japan and Taobao, China’s main online shopping site, formed an alliance to market each other’s products in their home countries, with Yahoo Japan offering about 50 million products sold by Taobao and Taobao selling about 8 million products sold by Yahoo Japan. Taobao offers about 400 million products but many will not be offered in Japan because they do not meet Japan’s drug regulations or they are feared to be counterfeit. Rakutan, Japan’s largest online retailer, also is planning to enter the Chinese market.

In 2010, Softbank increased its investment in two start-ups based in Silicon Valley: the microblogging service Twitter and the live video-streaming company UStream.

Softbank and Cell Phones

Softbank is Japan’s third largest cell phone operator. As of January 2007 it had 15.6 million subscribers and a 17 percent share of the market. Softbank was No. 1 in new subscriptions in 2008 with a net increase of 2.046,700 new subscriptions,

Softbank entered the cell phone market in 2006 after a massive $15 billion purchase of British giant’s Vodafone’s struggling Japanese unit. Vodaphone had 18.3 percent share on 2004. For a while its J-Phone service was popular and gave their company a big boost. Japan accounted for 23 percent of Vodaphone’s sales but only 10 percent of its profits.

Softbank is the parent company of Japan’s third largest cell phone company and the owner of 41 percent of Japan’s largest online media business, Yahoo Japan Corp.

Softbank is the fastest growing mobile phone carrier in Japan. It offers free calls between cell phones and land lines and has a deal with Apple to market I-phones, offering them for as low as $210.

Softbank, Smartphones and Apple

In 2008 Son brought the Apple iPhone to Japan, despite initial skepticism from critics who said the smartphone lacked many of the functions Japanese users were accustomed to---like a wallet phone function and mobile TV. The iPhone has been successful in Japan; shipments more than doubled, to 1.69 million units, in the year ending March 31, giving Apple a 72 percent share of the country’s smartphone market, according to the MM Research Institute in Tokyo. [Source: Hiroko Tabuchi, New York Times, May 30, 2010]

In April 2010, Softbank announced that would buy a stake in a JVC unit in part so it could enter the fast-growing, music distribution business and said it would double its coverage to meet smartphone demand . In Silicon Valley, some of Softbank’s recent investments include the live video-streaming site Ustream and RockYou, which develops applications for social networks. Softbank has said it intends to expand Asian operations for both companies.

Masayoshi Son ideas About Improving Internet Service in Japan

“Now he is risking the establishment’s ire once more with a radical idea to break NTT in two, arguing that this would be the best way to boost the take-up of broadband and help Japan create new online businesses, The Economist reported. “Broadband speeds in Japan are among the world’s fastest, but access is costly. So although 90 percent of Japanese households have access to high-speed connections, only 60 percent subscribe, compared with 96 percent in South Korea. [Source: The Economist, November 25, 2010]

“The government has a plan to loop the country with fibre-optic lines that will support internet access at up to 100 megabytes a second, ten times the speed of the technology being replaced. Mr Son argues that to guarantee fair access to this network---and thus the most efficient use of it---it should be run by an infrastructure firm hived off from NTT, owned jointly by all the telecoms operators. Instead, the government is likely to let NTT continue to run the network, but erect “Chinese walls” between those operations and the business of selling telephony and internet access. The communications ministry is uneasy with Mr Son’s plan because it eliminates incentives to build alternative infrastructure---although in practice, the chances of any other operator building a fibre-optic network to compete with NTT’s seem slim.”

“Mr Son argues that, whoever runs the new fibre-optic network, improved internet access is a vital part of any plan to revive Japan’s stagnant economy. Online health services could help it cope with an ageing and declining population. Unfortunately, he says, the country’s media, government and society look down on internet entrepreneurs, and the tax system makes it hard to build technology businesses using employee stock options, a cornerstone of Silicon Valley’s success.”

Softbank's Masayoshi Son on the State of Japanese Business

“They are the losers in battle. When you meet with them, they give all kinds of excuses. They blame the government; they blame the weather!” Son told The Economist. He has little patience for the risk-averse managers of the country’s sluggish industrial behemoths. Entrepreneurs like him “don’t give excuses for how tough the battle is, and how tough the handicap is---we always fight.” [Source: The Economist, November 25, 2010]

“Japan is unfriendly to entrepreneurs. Like the rest of Japanese society, its businesses have traditionally placed a premium on harmony, which in practice has meant propping up weak firms and making it harder for new, more efficient competitors to rise. Though some stragglers have been allowed to go to the wall, this insiderish ethos still lingers. As a result Japan has the lowest rate of start-ups among rich countries: one-third of America’s rate and half of Europe’s. Mr Son’s outspokenness is as rare in Japan as his enterprising spirit.”

Softbank in China

Softbank is racing to capture the booming Chinese Internet market. And in the process, it hopes to become a global player straddling what is fast becoming the world’s most wired region. “We want to be No. 1 in Asia on the Internet,” Son said. “Before anyone knows it, Softbank will be a step ahead.” [Source: Hiroko Tabuchi, New York Times, May 30, 2010]

Hiroko Tabuchi wrote in the New York Times, “Some of Softbank’s most promising ventures are in China, where it has made a series of strategic investments in some of the country’s most prominent Internet companies. It invested in the Chinese Web retailer Alibaba in 2000, pushing its founder, Jack Ma, to start Taobao, now the biggest e-commerce site in the country. Softbank remains one of Alibaba’s leading investors, with a 34 percent stake in the company. In 2010 Softbank introduced a service that connects Taobao to its Yahoo portal in Japan. Softbank also has a 35 percent stake in Oak Pacific Interactive, which owns the hugely popular social networking and game-playing sites RenRen and Kaixin.com.”

At the same time, Softbank has established itself as a bridge between Silicon Valley innovations and the growing Asian market, investing in American start-ups in exchange for rights to bring their services to Asia.

Softbank’s Strategy in China

Hiroko Tabuchi wrote in the New York Times, “China has been a notoriously difficult market to crack for overseas Web companies. Google, eBay and Yahoo, not to mention social networking sites like Facebook, MySpace and Twitter, have all struggled there, because of strong domestic competition as well as government blocking and censorship. American companies also complain that the country is not a level playing field; foreign companies must operate through locally owned firms, creating a cumbersome ownership structure that limits their flexibility. And some critics say foreign companies have failed to grasp the needs of local Internet users.” [Source: Hiroko Tabuchi, New York Times, May 30, 2010]

“But in its push into China, Softbank has avoided many of these headaches by focusing on e-commerce, local social networking sites and online games---sidestepping the difficulties of government censorship. For now, Softbank is betting that it will be commerce and entertainment, not the search for information, that drives Internet growth in China. Softbank has also dodged, so far, the animosity that foreign businesses and, particularly, Japanese companies sometimes face in China, rooted in the troubled historical relationship between the two countries. Mr. Son’s background---Japanese of Korean descent---gives him pan-Asian credentials. But more important, he is working with existing Chinese start-ups, forging strong capital partnerships but leaving local management in charge, winning him respect there. Mr. Ma of Alibaba sits on Softbank’s board, while Mr. Son is a director at Alibaba.”

“Softbank executives stress that success in Asia will hinge on mobile technology, because many users in the region are leapfrogging fixed-line Internet connections and using the Web from hand-held devices. In its push into China, Softbank has exploited its diversity as both a full-fledged mobile carrier and an online business. China has been slow to adopt 3G networks, but users do not seem to mind. It is a huge market: Almost 800 million people already use cellphones in the country, while its population of Internet users is nearing 400 million, and those numbers are expected to grow.”

“Being able to integrate our experience in running a mobile carrier, as well as our know-how in applications and handsets, is invaluable,” Tetsuzo Matsumoto, a senior executive vice president at Softbank, told the New York Times. “We no longer see ourselves as a Japanese company, or a cellphone carrier. Our aim is to become a global player on the Internet.”

Daisaku Masuno, who heads information technology and telecommunications research for Japan at Nomura Securities, described Softbank as a “trend-setting cellphone company,” which he characterized as “unheard of.” “Not only do very few companies have such a huge presence online in both China and Japan, both crucial markets,” he told the New York Times, but “anywhere else in the world, mobile carriers don’t understand the Internet and can’t keep up, and Internet companies don’t have the deep pockets or know-how to run cellphone networks.”

Softbank Earns $3.9 Billion in Profits in 2011

In April 2012, Yuri Kageyama of AP wrote: Annual profit at Japanese mobile carrier Softbank Corp. surged 65 percent, driven by strong demand for Apple’s iPhone 4S. Softbank, which did not break down quarterly numbers, reported a net profit of 313.8 billion yen ($3.9 billion) for the fiscal year through March, up from 189.7 billion yen the previous year. Annual sales jumped nearly 7 percent to 3.2 trillion yen ($39.5 billion). [Yuri Kageyama, AP, April 26, 2012|]

The fortunes of Softbank, once the underdog in Japan’s telecom industry, have improved after it started selling the iPhone in 2008. Initially, Softbank was the only Japanese phone company to offer the iPhone. Rival KDDI Corp. began to sell the iPhone in late 2011. Softbank still remains the sole vendor of the popular iPad in Japan. [Ibid]

Softbank, which also offers fixed-line broadband services, has carried out an aggressive marketing drive in recent years, starring a talking white dog that has proved popular among Japanese. Softbank’s success defied initial skepticism about embracing Apple products because of the strong position of local electronics makers previously reputed for the world’s most advanced cell phones.Highlighting the success of that strategy was a key part of the earnings presentation by Softbank President Masayoshi Son, often praised as Japan’s Steve Jobs. [Ibid]

“Softbank was the first to focus all our managerial resources on smartphones,” Son said. He said the three must-haves of the 20th Century---the washing machine, fridge and TV---had changed in the 21st century to the iPhone, iPad and cloud computing services. Son has recently become highly visible in pushing solar technology. That has made him stand out even more because the government is eager to stick to nuclear power. [Ibid]

Softbank Acquires Sprint in $20 Billion Deal

In October 2012, Reuters reported: “Japanese mobile operator Softbank Corp said it will buy about 70 percent of Sprint Nextel Corp for $20.1 billion, giving Softbank the American toehold it has long desired and Sprint the capital to expand its network and potentially buy peers. The deal for the third-largest U.S. wireless carrier represents the most a Japanese firm has spent on an overseas acquisition. [Source: Mari Saito and Tim Kelly and Nicola Leske, Reuters, October 15, 2012]

Announced by Softbank's billionaire founder and chief Masayoshi Son and Sprint Chief Executive Dan Hesse at a packed news conference in Tokyo on Monday, the transaction gives Softbank entry into a U.S. market that is still growing, while Japan's market is stagnating. Part of the deal involves a direct infusion of billions of dollars into Sprint, giving it the firepower to buy peers and build out its 4G network to compete in a market dominated by AT&T Inc and Verizon Wireless. [Ibid]

One way or another, analysts have long said the U.S. telecommunications industry needed to consolidate, but few looked to Japan as a catalyst. Some investors and rating agencies worried that Softbank is biting off more than it can chew. But the 55-year-old Son, a rare risk-taker in Japan's often cautious business circles, is betting U.S. growth can offer relief from cut-throat competition in Japan's saturated mobile market. Combined, Softbank and Sprint will have 96 million users. "It could be safe if you do nothing, and our challenge in the U.S. is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built," Son told the news conference. "But not taking this challenge will be a bigger risk.” [Ibid]

The financing is highly complex, involving at least three steps with two entities as well as a debt conversion. Softbank's newly created U.S. subsidiary New Sprint will buy $3.1 billion in old Sprint convertible bonds to start. After shareholders and regulators approve the proposed deal, Softbank will then buy $4.9 billion in New Sprint shares. The two together represent the $8 billion infusion directly into Sprint. On top of that, 55 percent of existing Sprint shares would be exchanged for $7.30 per share in cash, representing a further $12.1 billion. The transactions are to be completed by mid-2013, at which point New Sprint will be a publicly traded company and the old Sprint will survive as its subsidiary. [Ibid]

Softbank shares tumbled more than 8 percent before closing down 5.3 percent to their lowest finish in five months. The stock has lost more than one-fifth of its value - or $8.7 billion - since news first surfaced about its interest in Sprint. Credit rating agency Moody's said it was reviewing Softbank's ratings for a possible downgrade, but some analysts said Son's gamble might pay off in the end. "It's the same (market) reaction as when Softbank said it was going to buy Vodafone a few years ago. Everyone came out and said it was far too expensive," Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities, said ahead of the announcement. Softbank bought Vodafone's Japan unit for $15.5 billion in 2006. "Son made a company worth 3 trillion yen, and now it will be worth 6 trillion yen. That's quite impressive, and I think investors will realize he's making the right decision down the road," said Nakanishi. [Ibid]

An alliance with Sprint could also give Softbank leverage when dealing with Apple Inc, helping bolster its domestic position against KDDI Corp, which also offers the iPhone in Japan, and market leader NTT Docomo, which has yet to offer the Apple smartphone. This is not the first Japanese foray into telecoms overseas. NTT Docomo racked up big losses after a string of failed investments in names like AT&T Wireless and Taiwan mobile operator KG Telecom in the late 1990s and early 2000s. [Ibid]

Bravado Behind Softbank's Sprint Deal

The Wall Street Journal reported: “Softbank Corp.'s $20 billion takeover of Sprint Nextel Corp. is a calculated bet that the Japanese company can once again fix up a troubled mobile carrier and use it to rattle the industry's leaders. It is also an ego trip. [Source: Daisuke Wakabayashi, Anton Troianovski and Spencer E. Ante, Wall Street Journal, October 16, 2012]

"I'm a man," Softbank Chief Executive Masayoshi Son explained while announcing the deal Monday in Japanese. "It's part of my male ego to strive to be No. 1."Thus was launched one of the more unusual deals in U.S. telecom history. Sprint has long been expected to merge with a domestic rival. Instead, the nation's third largest wireless carrier is selling itself to a suitor from Japan that is carrying a lot of debt and has no experience in the U.S. market. [Ibid]

The buyer, an eccentric billionaire ranked by Forbes as Japan's second-richest man, will add Sprint to a collection of disparate properties that include Japan's third-largest mobile operator, a piece of Yahoo Japan Corp. and a stake in Chinese e-commerce giant Alibaba Group Holding Ltd. That means the deal won't benefit from the typical sources of cost savings---redundant networks, overlapping staff---that make telecom mergers pay off. [Ibid]

Mr. Son, like Mr. Hesse, has cast himself as a strong-willed executive trying to disrupt the hegemony of a cellphone duopoly in his country. After he bought Vodafone Japan, The Softbank CEO published an op-ed article in The Wall Street Journal laying out his attempts to bring "competitive pricing" to a market in which "two companies hold over four-fifths of the mobile-phone market share." He boasted of a "revolutionary" $25 a month voice and email package that he advertised in commercials featuring movie star Cameron Diaz. [Ibid]

At the time Softbank acquired it, Vodafone was the smallest major carrier in Japan and losing customers quickly. Softbank chipped away at its bigger rivals with aggressive marketing and discount pricing, then outmaneuvered them to become the exclusive Japanese carrier for Apple Inc.'s iPhone for more than three years. [Ibid]

"When two rich firms rule the market like a duopoly, we see this as a real opportunity for a challenger," Mr. Son said during a two-hour presentation to reporters Monday, referring to the two largest U.S. carriers, AT&T Inc. and Verizon Wireless. The Softbank CEO said he hopes to export to the U.S. some of his expertise running Softbank in Japan. Part of that expertise, one of the people close to the deal said, is an intricate customer-analytics system used at Softbank to help sales staff tailor their pitches and incentives to lure customers with the highest potential to be profitable. [Ibid]

Mr. Son said he would bring improvements in technology and services, but some investors groused that his comments were short on specifics about how Sprint's operations and tactics would change after the deal. In response to a question at the news conference in Tokyo, Mr. Son floated one specific product he might introduce in the U.S.: Digital photo frames that connect to the cellular network, something Softbank already sells in Japan. "I'd like to launch that" in the U.S., Mr. Son said, according to a transcript of his remarks as they were interpreted at the event. [Ibid]

He also pledged to help the U.S. launch new, high-speed networks. "Right now, when every time I come to the States, I say 'Wow! this is so slow, what is this? It's unbearable,'" Mr. Son said. That raised some doubts, one Sprint investor said, as the U.S. is actually farthest along in rolling out the latest network technology, called LTE. In the end the answer was: Trust me. "We have a very strong strategy and a very strong plan to make it happen," Mr. Son said. "So just wait and see.” [Ibid]

Background Behind Softbank's Sprint Deal

The Wall Street Journal reported: “Connections between Softbank's Mr. Son and Sprint Chief Executive Dan Hesse have been developing for some time. The men became acquainted with each other a decade ago when Mr. Hesse was running a laser-communications company called TeraBeam Networks in which Softbank held a stake. The idea---to put devices the size of small satellite dishes in office windows to transmit data at high speeds---never quite took off. But Mr. Hesse's four-year tenure as TeraBeam CEO was the foundation of what people close to the two men said has been a relationship between the two telecom executives. [Source: Daisuke Wakabayashi, Anton Troianovski and Spencer E. Ante, Wall Street Journal, October 16, 2012]

Mr. Hesse has long sought capital to help his heavily indebted carrier grow, attracting interest but not investments from companies like South Korea's SK Telecom Co. and Mexican telecom magnate Carlos Slim. Mr. Son, meanwhile, was looking to repeat the success of his 2006 takeover of Vodafone Group PLC's Japanese operations, which Softbank built into a strong competitor and took subscribers from the country's top carriers. [Ibid]

Talks grew serious earlier this year, when Mr. Son approached Sprint about a possible deal, the people said. Softbank had determined that it had finally stabilized its balance sheet enough in the wake of the financial crisis and the expensive Vodafone acquisition to look for ways to grow again, the people said. Mr. Hesse will remain CEO of the new Sprint, which will continue to be based in Kansas. But there is no question Mr. Son will be in the driver's seat. [Ibid]

Softbank Launches Green Energy Business

In September 2011, a foundation to promote renewable energy established by Softbank Corp. President Masayoshi Son was launched. The Japan Renewable Energy Foundation was formed to bring together experts in and outside Japan to devise policy recommendations aimed at promoting use of alternative energy resources such as solar, wind and geothermal power.

"It's time to completely overhaul the existing energy policy following the March disaster," Son, who shelled out $12 million yen of his own money to create the foundation. He called for separation of power generation from transmission operations to promote competition in the power industry and setting up wide-area power grids in cooperation with other Asian countries. The foundation is headed by Tomas Kaberger, former director general of the Swedish Energy Agency. Softbank, for its part, has decided to start natural energy businesses in the wake of the disaster under the initiative of Son.

After the earthquake and tsunami in March 2011 Son said he would donate $119 million and his $1.2 million salary for the rest of his life to victims of the disaster. He also said he allocate a percentage of Softbank’s revenues to green energy to reduce Japan’s dependance on nuclear power. In May 2011, Son founded a new company to build and manage renewable energy power plants.

In June 2011, SoftBank Corp. has gotten the green light to enter the power generation business from its shareholders, opening the way for the firm to launch a solar power company as early as this summer. SoftBank plans to set up a subsidiary company to operate a solar business as early as this summer and launch the construction of a power plant by the end of this year. "We have to create energy to replace nuclear power as soon as possible. We want to move toward solving Japan's problems," Son said during the meeting. [Source: Yomiuri Shimbun, June 27, 2011]

Son said his awareness of the energy issue was ignited when he visited evacuation centers in Fukushima Prefecture on March 22, about 10 days after the Great East Japan Earthquake. On April 20, Son offered some of his private funds to establish a natural energy foundation to promote clean energy.

SoftBank seems to have synergistic objectives for both its power generation and telephony business, observers said. If a smart grid power transmission network using information technology to automatically manage energy demand and supply is developed, the grid can also be utilized as a communications infrastructure, they said. IBM Corp. and Google Co. have already embarked on a smart grid strategy. "It didn't register earlier. [But now I realize] that's so Google," Son said of the companies during the meeting, suggesting SoftBank's plans to enter the power generation business.

SoftBank and 19 prefectures previously announced they would set up a natural energy council in July to promote clean energy sources such as solar and wind power. An additional 15 prefectures have said they would join the council. On Son's frequent meetings with Prime Minister Naoto Kan, an industry source said, "I doubt [SoftBank] is looking to acquire Tokyo Electric Power Co.'s power supply business under the separation of electricity generation and transmission."

Softbank Solar Power Plants

In July 2011, SoftBank Corp. announced plans to set up a "natural energy consultation council," tasked with coordinating with local governments to construct large-scale solar plants nationwide.SoftBank plans to start constructing solar power plants by the end of this year, with maximum power output per plant expected to stand at about 20,000 kilowatts.

In April 2012, Kyodo reported: “Softbank Corp. is planning to build what would be Japan's largest solar power plant in Tomakomai, Hokkaido, with an output capacity of at least 200,000 kilowatts, industry sources said. Softbank's subsidiary SB Energy Corp. is planning the photovoltaic power plant, thought to be larger than many overseas plants if completed, before Japan introduces a system in July in which power companies are obliged to purchase electricity generated by other firms and households from renewable energy sources such as solar power. [Source: Kyodo, April 4, 2012]

“The solar farm is being designed to have a maximum output capacity of 340,000 kw to cover some 100,000 households and SB Energy is negotiating with Hokkaido Electric Power Co. over electricity purchases through the so-called feed-in tariff system, according to the sources. The utility has responded that it can accept some 200,000 kw, based on the existing infrastructure for electricity delivery, they said. [Ibid]

“Softbank, the Tokyo-based mobile phone carrier, plans to install photovoltaic panels at a 480-hectare site on the waterfront of an industrial district in eastern Tomakomai on the country's northernmost main island, the sources said. The company announced in early March it was setting up solar power plants in Kyoto, Gunma and Tokushima prefectures. The plant in Tomakomai is far larger than the others, which have an output capacity of 4,200 kw, 2,400 kw and 5,600 kw, respectively. [Ibid]

“A solar plant project in Aichi Prefecture developed by Mitsui Chemicals Inc. and others, which will have a capacity of 50,000 kw, was considered the largest among existing plans in Japan before the project in Tomakomai. Softbank and Hokkaido Electric will finalize details of the schedule for construction, power generation capacity and the amount of electricity to be purchased when the government sets the purchasing price. If the price is set below 40 yen per 1 kilowatt-hour, which is said to be a profitable line of business, the company may face possible downsizing of the plant. [Ibid]

In December 2012, Jiji Press reported: “SoftBank Corp. will launch its power generation business by installing solar panels on the rooftops of houses starting next spring. The project will be led by SB Energy Corp. The Internet and telecommunications business group plans to initially install rooftop solar panels atop 1,000 houses in 31 prefectures including Miyagi, Aichi, Osaka and Fukuoka. It hopes to lease the rooftops for 20 years, SoftBank said Wednesday. It plans to sell the electricity under the new feed-in tariff system introduced in July, which requires power companies to buy up all electricity generated from renewable energy sources. [Source: Jiji Press, December 14, 2012]

Image Sources: Hector Garcia blog

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Yomiuri Shimbun, Daily Yomiuri, Japan Times, Mainichi Shimbun, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Page Top

© 2008 Jeffrey Hays

Last updated January 2013

This site contains copyrighted material the use of which has not always been authorized by the copyright owner. Such material is made available in an effort to advance understanding of country or topic discussed in the article. This constitutes 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. If you are the copyright owner and would like this content removed from factsanddetails.com, please contact me.