Worries that Softbank’s purchase of 70 percent ownership of Sprint Nextel...
Worries that Softbank’s purchase of 70 percent ownership of Sprint Nextel will lead to steep price cuts or a spike in capital expenditures “may be overdone,” New Street Research analyst Kirk Boodry said Tuesday in an investor report (http://xrl.us/bn3wh7). Softbank…
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“should bring more discipline to cost management in the U.S.,” Boodry said in the report. “Even without that, however, we believe Sprint is already on a recovery path that should add value over time.” Softbank announced last month that it had agreed to buy control of the No. 3 U.S. wireless carrier for $20.1 billion (CD Oct 16 p1). Investors should put Softbank’s actions after its 2006 purchase of Vodafone Japan into context as they divine what to expect if the Sprint deal goes through, Boodry said. While there were steep price reductions after Softbank acquired Vodafone Japan, those reductions were inevitable and were not a product of the acquisition, he said. New Street analyst Jonathan Chaplin said Wednesday in an email to investors that the report supports his belief that “Softbank will probably not push an aggressive pricing strategy in the U.S.” There has also been some controversy surrounding Softbank’s use of telecom equipment from Chinese-owned Huawei and ZTE, and that is likely going to impede Softbank from working with either company in connection with Sprint, Boodry said. The House Intelligence Committee said last month in a report that it “strongly” recommended that U.S. companies not do business with either company because of national security concerns (CD Oct 10 p3). Still, industry sources have said that is unlikely to derail the deal (CD Oct 22 p3).