You may not have heard of SoftBank, but you’ve almost certainly used their products. The Tokyo-based company owns $181.6 billion worth of companies around the world, from investment companies like Fortress Management Group ($FIG) to video game companies like GungHo Online Entertainment. Several years ago, SoftBank even bought Sprint (the telecom/mobile phone company). Just last year, they bought ARM Holdings, a company that designs processors for mobile devices, routers, cars, and countless other computer devices.
SoftBank makes billions of dollars a year in income and revenue. The company’s stock is up 44% in the last year and 9.18% since the beginning of the year. Needless to say, they know how to run a business, which businesses to acquire, and what to invest in.
Recently, Softbank CEO Masayoshi Son met with President Donald Trump. During their meeting, Son revealed that his company will invest $50 billion into creating 50,000 job in the United States. The company would also invest in U.S.-based businesses as part of their $100 billion fund that they set up for technology investments.
While $50 billion is a big investment for the company and will let the company make more revenue from new sources, they’re not creating jobs simply out of the kindness of their heart. They could, in fact, be looking for something in return.
SoftBank bought 78% of Sprint for $22 billion.
Sprint ($S) is currently the fourth-largest mobile service provider in the United States, trailing behind T-Mobile, AT&T, and Verizon. Regardless of this fact, the company still has a $1.99 billion operating income and their stock increased by 177.5% in the last year. Since their first investment was approved by government regulators, SoftBank purchased an additional 2% in the mobile services company.
SoftBank’s investment in the United States made President Donald Trump a fan.
Trump has championed SoftBank’s future contributions on Twitter and in speeches. This raised the profile of the company and their subsidiaries, making them more valuable due to the close-knit ties with the current U.S. president.
SoftBank, however, wants something in return: a hassle-free merger or acquisition.
Sprint previously tried to merge with T-Mobile ($TMUS), but regulators prevented the two companies from becoming one. Now that SoftBank is creating U.S. jobs, the company could possibly ask for Trump and company to turn a blind eye to that proposed merger again. T-Mobile is certainly open to a merger or acquisition, and FCC chairman Tom Wheeler can no longer stand in their way (as he’s out of a job).
Comcast ($CMCSA), a major telecommunications and media company, could also acquire Sprint.
Comcast currently does not own a mobile service provider, something that could make it compete better with the likes of AT&T and Verizon. If Comcast attempted to acquire Sprint during the previous administration, it would be blocked by regulators in a heartbeat for being anti-competitive (among many other reasons). Now that Trump is in power, nothing is really standing in the company’s way from acquiring Sprint or a T-Mobile.
SoftBank’s potential mergers and acquisitions are good for them and their shareholders…and bad for everyone else. If T-Mobile and SoftBank merge, it puts Sprint in a position to become one of the leading mobile service providers. It also increases their revenue streams due to the sudden influx of new customers. If Comcast acquires Sprint, it gives the company a new and diverse revenue stream, while using their billions of dollars to possibly become the biggest mobile service provider over time.
For customers, however, billion-dollar acquisitions and mergers mean less choice, potentially increased costs, and less competition. As you know by now, this could mean an increase in cost and a decrease in quality, among many other things.