Sprint/Softbank tie-up could escalate mobile payment wars


Analysts say a potential partnership between Sprint Nextel (NYSE:S) and Japanese operator Softbank could result in new mobile commerce services coming to the U.S. market.

Sprint confirmed Thursday that it is in talks with Softbank, which is reportedly mulling a "substantial investment" in the American carrier. According to The Wall Street Journal, the deal--which could exceed $12.8 billion--would award Softbank a 70 percent ownership stake in Sprint, which would remain a publicly traded company. The agreement would enable Sprint to pay down debt, strengthen its balance sheet and put the company in position to consider acquiring other carriers, while giving Softbank a foothold in the U.S. wireless market.

Chetan Sharma, an independent telecom analyst, told The New York Times that a completed deal would likely give Softbank broad control over Sprint's future, adding the Japanese operator could influence how Sprint deploys network upgrades or adds new consumer services. Sharma said Sprint subscribers likely will benefit from cutting-edge mobile commerce and location-enabled marketing services on par with those available in the Japanese and South Korean markets--for example, mobile payment services, as well as analytics solutions that leverage subscriber data to offer improved map directions or purchasing recommendations.

"Things that Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL) are trying to do here, operators are [already] doing in those countries," Sharma said.

Softbank's existing efforts include PayPal Japan, a 50/50 joint venture with eBay-owned PayPal announced in May 2012. Softbank is investing $12.5 million in the company, which is rolling out the PayPal Here mobile commerce platform to Japanese retailers. Introduced this March, PayPal Here enables small businesses and other users to process credit and debit transactions by swiping the card through a small, triangle-shaped dongle that attaches to their smartphone or tablet. More than 300,000 merchants in the U.S. and Hong Kong have signed up for PayPal Here.

PayPal also offers mobile wallet services enabling consumers to connect their existing PayPal account to their mobile device and fund purchases by entering their phone number and PIN code into the retailer's point-of-sale terminal. Beginning in 2013, Discover will enable all 7 million existing merchant partners across the U.S. to accept PayPal transactions--the firms are also negotiating to extend the alliance to Discover's international payments network.

Insiders claim Sprint is working on a Near Field Communications-based mobile wallet service called Touch. At present, Sprint offers a handful of Android smartphones supporting the Google Wallet contactless payment service--the carrier also offers a mobile wallet without NFC capabilities, enabling subscribers to buy physical and digital products directly from their phones by entering a universal PIN code and billing purchases to their existing Visa, MasterCard and Amazon Payments account. Sprint additionally supports on-device transaction services from Boku and BilltoMobile.

Sprint is conspicuously absent from Isis, the nationwide mobile commerce network spearheaded by competing operators Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and T-Mobile USA. The NFC-based Isis mobile wallet is reportedly poised to launch consumer trials in the Austin, Texas and Salt Lake City markets on Oct. 22.

Softbank has also been aggressive in the mobile advertising segment: In May 2011, the carrier completed a $200 million investment in San Mateo, Calif.-based mobile advertising network InMobi. At the time of the deal, InMobi said it would leverage the investment to build out its mobile advertising ecosystem, also focusing on its SmartPay mobile app billing system as well as HTML5-based rich media production and distribution.

Earlier this month, Sprint partnered with Amobee to launch Pinsight Media+, a mobile advertising platform enabling brands to roll out campaigns targeted to subscribers' preferences and behaviors. Pinsight Media+ connects marketers and third-party publishers with mobile advertising networks including Jumptap and RedMas. Sprint's 56 million subscribers can select whether they wish to share anonymous information about their location and the ways they use their mobile device--customers who opt in to Pinsight Media+ targeting will see usage-based ads delivered according to their personal interests across operator-owned properties like the Sprint Web on-deck portal and Sprint Zone account management app, as well as third-party properties.

Craig Moffett, an analyst with Sanford C. Bernstein, told The New York Times that it is too early to draw any conclusions about how a Sprint/Softbank deal could shake out, explaining any Softbank investment is simply a play to acquire spectrum holdings. Even so, Moffett said the investment would make little sense.

"There are no synergies whatsoever in a Japanese company buying a U.S. telecom operator," he said. "This is tantamount to Japanese buyers buying Rockefeller Center. Unless they simply think they're investing in U.S. real estate, and it happens to be electromagnetic real estate that they're buying, this is not a merger with anybody. This is just somebody coming in and buying Sprint stock."

For more:
- read this New York Times article

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