One month ago, the Japanese billionaire Masayoshi Son, the chief executive of SoftBank, crossed the lobby of Trump Tower and put his arm around the new U.S. president-elect.
Shares in Sprint, the U.S. telecom company that is controlled by SoftBank, surged 10 percent that day and the next, creating a windfall worth $3.3 billion for Sprint's shareholders.
Sprint's stock price spiked on Wall Street's belief that the meeting was an attempt to ensure that Donald Trump will look favorably on Son's plans for expansion in the United States, analysts say, especially Sprint's potential acquisition of T-Mobile. When SoftBank bought Sprint in 2013, Son was clear about his ambition to merge Sprint and T-Mobile to create a strong third mobile carrier that could compete with AT&T and Verizon.
“They might not have talked about the merger specifically, but Masayoshi Son certainly brought flowers. The intention is clear,” said Roger Entner, an analyst at Recon Analytics. By forging a relationship with the president-elect, he added, Son “is laying the groundwork for a more lenient way to look at buying T-Mobile.”
Sprint representatives declined to comment.
Sprint's stock gave up those gains over the following week. By then, though, investors had sunk hundreds of millions of dollars into the company's stock. Trading volumes roughly tripled as 115 million shares changed hands on Dec. 6 and 7. Those with cooler heads stood to make a small fortune on little more than the buzz surrounding Trump and Son's handshake.
The meeting was a demonstration of Trump's penchant for salesmanship and how disruptive presidential publicity could be for markets once Trump assumes office. For the most part, his predecessors have refrained from involving themselves in the affairs of individual companies.
The T-Mobile merger
Sprint's stock price already had been climbing despite the company's relatively high debt load and sluggish growth. By number of subscribers, the company was surpassed by T-Mobile as the third largest U.S. carrier, behind Verizon and AT&T, in 2015. For years, Son and SoftBank have been trying to engineer a turnaround in Sprint’s performance.
Sprint previously considered the merger with T-Mobile but dropped the idea in 2014 after federal regulators signaled that it might violate antitrust laws. Last week, however, T-Mobile chief executive John Legere told reporters that a merger was still a possibility.
“There are a number of people who think, well, it may make sense from a scale standpoint to consider the coming together of T-Mobile and Sprint,” he said. “You pretty clearly have to say that is one of many potential future outcomes of the industry structure.”
While Sprint's investors are looking forward to a possible deal, Entner of Recon Analytics is still skeptical of the benefits. Sprint may have to pay $100 million or more to acquire T-Mobile, and T-Mobile management could choose to leave, especially given Son’s notoriously hands-on management style.
“Ironically, the two biggest winners from the merger of T-Mobile and Sprint could be Verizon and AT&T, because for at least a year, if not longer, [Sprint and T-Mobile] would be concentrated on integrating the company and merging it,” Entner said.
Past mergers between telecom companies have had similar issues. At the time of Sprint’s purchase of Nextel, Sprint was “within striking distance” of AT&T and Verizon, Entner says. But the merger consumed the attention of Sprint management and the company ultimately fell behind.
Jeffrey Kagan, an industry analyst in Atlanta, said there might be other reasons for investors' recent enthusiasm about Sprint, including optimism about Son's leadership.
“I don’t think the Sprint stock is increasing just because of the potential merger with T-Mobile. That would just be frosting on the cake,” he said. “I think it’s Masayoshi Son, getting to know him better and understanding that he’s going to be a player.”
In the Dec. 6 meeting, Son announced that SoftBank would invest $50 billion in the United States and create 50,000 jobs — though analysts widely speculated that Son was already planning to invest the money in the United States. He recently finished raising a $100 billion fund to invest in emerging technologies. SoftBank, the Saudi Arabian government, Apple, Qualcomm and Foxconn are all investors.
'Concentration of power'
Some legal experts and analysts on Wall Street caution that there is no guarantee that Trump's nominees will support the merger either, and that if it is approved, the deal will ensure Sprint's success.
As a candidate, Trump was critical of other mergers in telecommunications. In October, he challenged AT&T's proposed acquisition of Time Warner, calling the deal “an example of the power structure” and pledging that the deal would not go through on his watch.
“It's too much concentration of power in the hands of too few,” he said.
After looking at the issue more closely, Trump might not deliver on those promises, said Bruce McDonald, an attorney at Jones Day and a former antitrust official in the Bush administration.
Trump has named two experts on antitrust to his transition staff. One is Joshua Wright, whom Trump tapped to lead the transition of the Federal Trade Commission. The former commissioner took a tolerant approach to mergers and dissented frequently and forcefully from his colleagues when he felt the case for preventing a deal was inadequate.
The other is David Higbee, who is part of the transition staff for the Justice Department. He served in the Bush administration as an antitrust lawyer and also has taken a lenient approach to proposed deals.
But McDonald said that it is still unclear whether their views will prevail as Trump selects his antitrust staff.
“Mr. Trump’s populist approach may become part of the decision-making mix in all parts of the new government,” McDonald said. “I don’t think anybody can claim to know exactly how things are going to look.”
Last month, Trump said Sprint would create 5,000 positions for American workers. A Sprint spokesman said some of the jobs would come from new salespeople hired in Sprint stores, while others may come from third-party vendors relocating customer-service positions to the United States.
These announcements may be generating goodwill for the company, but analysts caution that bringing jobs back to the United States will also impose costs, at a time when Sprint has been in the red.
“Bringing back 5,000 jobs increases costs for Sprint, and Sprint is a company that’s losing money,” Entner said. “So yes, you’re currying favor with the administration, but at a cost.”