By buying majority control of Sprint Nextel for $20.1 billion, Softbank is making an enormous bet that it can turn around a flailing company beset by larger rivals.
It's not the first time that the Japanese company and its chief executive, Masayoshi Son, has taken on a daunting gamble.
Known as a voluble entrepreneur given to pursuing his vision despite naysayers' criticisms, Mr. Son believes that by buying Sprint, he can help the ailing cellphone service provider trump the duopoly of Verizon and AT&T that has long dominated the American market.
It's a game plan that he followed in 2006, when Softbank bought Vodafone‘s Japan arm for $15 billion, in an effort to add mobile communications as his company's latest division.
And much of that drive is based on Mr. Son's belief that he is simply smarter and more agile than the existing market players.
“We are from the Internet world,†he said during an analyst call on Monday. “We are differen t from the incumbent telephone companies.â€
Begun as a software publisher in 1981, Softbank successfully moved into Internet services, amassing a market value of up to $180 billion. He partnered with a nascent Yahoo to create the American company's joint venture in Japan, which gave him a stake in a then-rapidly growing Web giant.
After the dot-com boom had busted, however, Softbank's stock capitalization shrank to as little as $20 billion.
Mr. Son persevered and rebuilt his company, before staking a significant portion of its future on wireless services. By 2006, Japan's cellphone market was dominated by NTT DoCoMo and KDDI, with Vodafone's operation stuck in a distant third place.
He aimed to change that dynamic with a combination of aggressive marketing and savvy pricing. Until last year, Softbank was the only Japanese service provider to offer the iPhone. And it has rolled out services like the White Plan, a voice-and-data plan with a simplified pricing scheme that caught on with metropolitan subscribers. (That's despite offering what some analysts describe as the worst coverage in Japan.)
And Softbank has been heavily focused on expanding its Long Term Evolution high-speed data network, employed by the latest batch of smartphones.
That strategy has produced results. Softbank has raised its earnings before interest and taxes to $2.5 billion for its 2012 fiscal year, outstripping KDDI, according to a presentation published on Monday. And if the company's $2.3 billion purchase of a smaller rival, eAccess, goes through, it will overtake KDDI as Japan's second-biggest mobile service provider.
The game plan had put Softbank on the path to paying down its significant debt load, which stood at nearly $13 billion as of June 30. But news of the company's designs for Sprint weighed heavily on its shares, as investors fretted about the enormous amounts of borrowing needed to finance that transaction and the A merican company's turnaround. Shares in Softbank fell 5.3 percent on Monday, to 2,268 yen, and have tumbled nearly 17 percent since last Thursday.
Still, Mr. Son apparently believes that moving into a new market - a larger one with plenty of growth in the lucrative smartphone sector - is a better strategy over all for his company and its investors. Softbank's plans include aiding Sprint in upgrading its network to L.T.E., as well as using its new partner as a vehicle to roll up smaller competitors and battle with the reigning cellphone network operators.
“It's not an easy path to go,†Mr. Son said at a press conference in Tokyo, according to Bloomberg News. “But without taking on a challenge, we may end up facing bigger risks.â€
