When Masayoshi Son, the Japanese telecoms billionaire, stormed into the US in 2013 by snapping up a controlling stake in Sprint for $22bn, his plan was typically audacious. He wanted to combine the third-largest US wireless group with T-Mobile US, the number four, to create a new force in telecoms that would take on the market leaders: Verizon and AT&T.
The smaller carriers have always struggled to win share from Verizon and AT&T, which together have 180m wireless phone subscribers, over 70 per cent of industry revenues and the best network coverage. Yet Mr Son, or “Masa” as he is known, spotted a major weakness at the “big two”.
His strategy was clear: Verizon and AT&T pay chunky dividends — among the highest in the S&P 500 — and their shares are a favourite among income investors. If a combined Sprint and T-Mobile were to launch a price war, he predicted the larger companies would struggle to respond, sacrificing customers rather than profitability and cash flow. He calculated that this would make it easy for Sprint to pick off enough subscribers to become a threat.