SoftBank's telecom retreat is nearly complete
SoftBank continues its tail-between-the-legs retreat from a telecom market it once sought to conquer. After relinquishing control of Sprint, and agreeing a $40 billion sale of Arm to Nvidia, it has now sold Brightstar, a mobile phone distributor that generated more than $9 billion in revenues last year.
Announcing the move today, SoftBank said it would flog shares in Brightstar to a private equity firm of the same name. Brightstar Capital Partners (BCP) will acquire 75% of the business for an undisclosed fee, leaving SoftBank with a quarter of the business. After selling Arm to Nvidia, and disposing of a stake in its Japanese telecom business, SoftBank will have no control of any telecom asset.
The Brightstar move is the latest ignominy for SoftBank CEO Masayoshi Son, whose recent technology gambles have looked as shrewd as an impulsive bet on a favorite sports team after an evening's debauchery.
His dismal failure to revive Sprint – one of only four nationwide mobile operators in a vast market – largely explains why regulatory opposition to a merger with T-Mobile eventually crumbled. Employees and consumers are likely to pay. Outside telecom, investments in WeWork, a badly managed office-rentals business, and Uber, a ride-hailing app that racked up billions in losses last year, have been costly.
Despite all this, Son is still revered as a canny investor. His reputation owes much to a $20 million bet he made in 2000 on a little-known Chinese e-commerce firm called Alibaba. Now one of China's Internet behemoths, Alibaba has enriched Son. But there has been no lucrative sequel.
As investments have soured, the Japanese billionaire has been forced to quit ventures that were intrinsic to his worldview just a few years ago. Arm is the standout example. A designer of central processing units for billions of smartphones, the UK-based company would make SoftBank a linchpin in a future "Internet of Things" market, said the Japanese firm when it paid more than £23 billion ($30 billion, at today's exchange rate) for Arm in 2016. Nvidia's rationale for a $40 billion takeover is not so different from SoftBank's.
Most rational types pray regulators will block the sale, though. Arm has thrived as an independent designer that can license CPUs to any chipmaker on the planet. Although its sales have flatlined under SoftBank's ownership, the Japanese company at least had no reason to interfere with its modus operandi. That hardly goes for Nvidia, which would be selling Arm's designs to chipmaking rivals.
Brightstar's performance has been suitably abject in recent years. It is still loss-making, even if its operating loss narrowed to about 5.3 billion Japanese yen ($50.8 million) in its last fiscal year, from about JPY44.7 billion ($428.5 million) two years earlier. Sales have been on the slide, too. They fell to about JPY955 billion ($9.2 billion) last year, from JPY1.08 trillion ($10.4 billion) the year before.
"The company has grown tremendously and become a leader of end-to-end device lifecycle solutions," said Marcelo Claure, Brightstar's founder and the chief operating officer of SoftBank Group (SBG), in a statement that overlooked Brightstar's recent dimming. "I am incredibly proud of what Brightstar has accomplished over the years and excited for its future. SBG looks forward to partnering with BCP as Brightstar enters into its next phase of growth."
Thankfully, the fallout from Brightstar should not be as toxic as that from other divestments. Trade unions and consumer groups can partly blame the recent consolidation in the US mobile market on SoftBank's woeful management of Sprint. It will have occurred to Arm's founders, hugely critical of the latest mooted deal, that an Arm sale to Nvidia would probably never have been proposed if SoftBank's investments had worked out as planned.
Son gave his prognosis for the $100 billion Vision Fund, SoftBank's huge investment vehicle, during a presentation in May. After likening himself to a misunderstood Jesus, he estimated that 15 of the 88 Vision Fund companies might go bankrupt and hoped another 15 would ultimately thrive. If he is right, his co-investors will start worshipping him once again. But his resurrection would be questionable. Spread the net widely enough and anyone should eventually catch a few fish.
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— Iain Morris, International Editor, Light Reading