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Softbank Armors Sprint Nextel Corporation (S) to Fight Its Wireless Rivals

In addition, Clearwire runs on a similar network as Softbank in its home country, so Softbank carries expertise in running the TD-LTE network. The Japanese carrier is also better positioned to crack a better deal with equipment manufacturers and handset makers because of its bigger scale and wider operations. This will help Sprint experience better cost synergies by pulling down its cost of operations. The spectrum will play a key role for Sprint in offering unlimited data plans.

Sprint answers T-Mobile

Meanwhile, on Thursday, T-Mobile announced that the company would allow its customers to upgrade their phones every six months under its Jump (Just Upgrade My Phone) plan, compared to other carriers that let customers upgrade their handsets not before two years. Sprint did not take long to answer. The very next day Sprint announced an unlimited data service, claiming that ‘we are distinctly different in our market position’ from its rivals.

Both big and small carriers are trying hard to bolster their spectrum holding. Sprint Nextel Corporation (NYSE:S) did it by acquiring Clearwire, while T-Mobile went on to purchase MetroPCS. What about the two biggies?

AT&T leaps to augment its spectrum position

Wireless carriers are seeking to make an alliance with airwave rich partners to bolster their spectrum holding and improve their competitive position. The FCC incentive auction is not going to take place anytime soon and therefore it renders no immediate solution. Accordingly AT&T plans to buy Leap Wireless, a no contract carrier, in a takeover bid of $1.19 billion in cash which is $15 per share. The acquisition would enable the second largest U.S. carrier in bolstering its network by using the unused spectrum of Leap. The deal is subject to the Federal Communications Commission and the Department of Justice review. The Dallas carrier expects the deal to conclude in 6 to 9 months.

My takeaway

The Sprint-Softbank deal has worried the wireless biggies as well, particularly as it guarantees to offer unlimited data plans through its ‘Sprint Unlimited Guarantee’ scheme. The third largest carrier is pretty confident that this differentiated service would attract several subscribers and pose a tough challenge to both Verizon and AT&T. The biggies have long switched to tiered pricing data plans. Though T-Mobile offers unlimited data plans, it throttles the data speed down to 2G beyond a particular threshold. The wireless industry is going to see some big changes with increased competition and wider consumer choices. It would be interesting to see how Softbank moves along its plan to build a stronger Sprint.

The article Softbank Armors Sprint to Fight Its Wireless Rivals originally appeared on Fool.com and is written by Rajesh Marwah.

Rajesh Marwah has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Rajesh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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