We are in a new world now where its hard to believe what just about anybody says. ARoid says he never doped but then he admitted he did. Bill Clinton never smoked but then he did but then he never inhaled. Barack Obama said he would close Guantanamo but then he didn’t. Edward Snowden says he isn’t a traitor, just wanted to shine a little light on the National Security Agency. Thirty years past 1984, how did George Orwell know that the world would develop in this direction and we would need Mr. Snowden to reveal the degree to which Big Brother was really watching us, reading our email and tweets, tracking our phone calls, checking up on our doings on Facebook, and so forth?
Once upon a time, corporate executives would never lie to investors. Now they do it all the time. Consider this: Masayoshi Son is one smart short billionaire dude. Dan Hesse Sprint CEO is one tall man who I am told plays good golf. I guess along with being tall goes telling tall tales even when you know they are not true even while asserting you are an agent of ethics and morality. Read this hypocritical statement signed by Hesse himself:
“A Message from Dan Hesse, Sprint CEO:
In today’s marketplace, ethical governance and good corporate citizenship have never mattered more. In fact, research by the Reputation Institute shows governance and citizenship now outranks traditional factors, like innovation and performance, among the key drivers of a company’s overall reputation. The research also shows that improvements in reputation directly correspond with increased customer consideration. Company leaders should maintain a balance between economic priorities and corporate responsibility…”
Over the last year, Sprint was acquired by Son’s Softbank. In turn, Sprint acquired Clearwire because it had to for a terrific competitive position and to mimic the very successful offerings Softbank has ridden to great success in Japan. From the minute the Softbank deal was announced the untruths began to flow:
1. We are not interested in buying Clearwire.
“One of the first things Son and Hesse announced at the time they announced their deal was the irrelevance to their merged activities of Clearwire. Not a soul on this planet ever believed that. So after crushing Clearwire in every way it could think of, Sprint made a bid for Clearwire not long later. The value of its spectrum was obvious to all. They pledged to not let Clearwire fail. There was no generosity there. It was because Son’s plan depended on the utilization of the 2.5Ghz spectrum that Son had used to good advantage to offer the fastest system available in Japan. It was my view in “Buy One Get One Free” that what Son wanted all along was Clearwire but he had to control Sprint to get it.” Joan Lappin Forbes.com 6/26/13
2. We don’t need all that Clearwire spectrum. It is irrelevant to us.
That was the best joke of all. Masayoshi Son got nothing much with Sprint except an ill run dog that spent years crashing from 70 to 2. Not all of that collapse was on Hesse’s watch but the last drop from 15 to 2 was. Son has already exploited 2.5 Ghz in Japan to build the fastest system there for voice and data. He knows how to compete with an excellent product. The only appeal to Sprint was its 50ish% ownership of Clearwire which , surprise surpise, owns a ton of 2.5 GHz spectrum.
3. We are staying in Kansas.
Before he even closed on the deal, Son procured office space in San Francisco near where he attended UC Berkeley. For sure, he didn’t want to be traveling to Kansas when California would do, especially for attracting top talent for his efforts to offer a truly excellent service to Americans, something about which Sprint knew little. Somehow, the Midwest is nice but it’s hard to explain why Overland just doesn’t pull the same quality people as SF. Maybe Hesse was telling the truth on this one but Son wanted no part of it.
As reported by Bloomberg on May 12, 2013,
“title="Get Quote">SoftBank Corp. bidding to take over Sprint Nextel Corp. (S) in a $20.1 billion deal, is planning a new Silicon Valley office for the U.S. carrier that would employ as many as 1,000 people.
‘Executives have already started holding monthly meetings in the California technology hub, which is partway between Softbank’s Tokyo headquarters and Sprint’s offices in Kansas. Masayoshi Son, president of the Japanese carrier, said he’s looking to inject more of an inventive spirit into Sprint and be an active chairman of the company.
‘Son, 55, also owns a mansion in Silicon Valley. He bought a 9-acre (3.6 hectare) estate in the suburb Woodside for $117.5 million cash in November 2012, a person with knowledge of the transaction has said. During his meetings last week, he pulled up to the Rosewood Hotel in Menlo Park in a gray Rolls-Royce.
“Silicon Valley is more convenient for me,” Son said.”
4. We are never paying more than the $2.90 we offered to pay for Clearwire on 12/13/2012
That was until shortly thereafter when they raised their bid to $2.97. Then there was Charlie Ergen and his DISH and his bid at $3.30 which Sprint had to match. Then there was Jamal Daniel, his Crest Financial, and other holders refusing to tender. Then there was a brief chink in the Clearwire armor when its special committee, supposedly independent but never much acting like it, favored an outside bid. Then there was the final bid at $5 when some of the short term hedgies folded their cards to take their short term gains. To be frank, that was far less than Clearwire holders should have received but it was a lot better than the price under $1 to which it fell when Sprint stupidly thought it could force Clearwire into bankruptcy and actually grab the spectrum. That final bid put Clearwire as a triple in 2013 making us glad we hung with it through thick and thin.
Oh well, no we won’t be bidding after all. We have all that Clearwire spectrum and we don’t need to bid in the H block auctions at the FCC.
Rumors now are that Sprint and TMobile will consolidate. Three years ago my dream was three large, viable competitors in the United States so consumers would really have a viable alternative to ATT and Verizon. Against all odds, the FCC came down on my side of the anti-competitive argument that ATT should not be allowed to buy T Mobile. Perhaps 2014 will be the year in which we finally come to a triopoly from which consumers can chose. Rumors are rife now that Son is out trying to line up financing to buy T Mobile to bulk up his U.S. positions.
It’s Christmas time. Hesse won some best CEO award this year. Maybe he will decide that being Pinocchio just doesn’t fit with his epistles on ethics or being some macher in the telecom industry. (for those who don’t live in NY or know any Yiddish a macher is a big deal.) For now, he is a tall man with a long nose. Maybe there is a patent medicine cure for this disease although ARoid certainly doesn’t know it. Maybe they used to sell it at Balcor but they are out of business now.
Joan E. Lappin CFA Gramercy Capital Mgt. Corp.
Mrs. Lappin, Gramercy Capital and its clients own shares in Sprint at this time. For help with your portfolio in these unusual times: information about our firm: email@example.com. To follow Joan on Forbes.com click on the button at the top of this article. To follow Mrs. Lappin on twitter: @joanlappin.