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Softbank driven by investments, acquisitions

Japanese Internet company isn't afraid to take on big players through acquisitions

By Martyn Williams
October 11, 2012 01:26 PM ET

IDG News Service - In 2001, Nippon Telegraph and Telephone, Japan's dominant telecom provider, got a shock. It had just started DSL broadband Internet service and was taking its first steps toward reaping the benefits of an ambitious and costly plan to string fiber-optic cable along every street in the country when along came Softbank.

Emboldened by a few shrewd investments in Internet startups, including a particularly successful investment in Yahoo, Softbank decided having its own Internet connection business would mesh well with its stable of startups, and the company wasn't afraid of busting down NTT's doors to do it.

Softbank's DSL service debuted at less than half the price of NTT's, forcing the bigger company and other competitors to scramble to match it. Aggressive investment in the latest technology meant that within months Softbank wasn't just delivering cheaper DSL but a faster service. And an equally aggressive marketing campaign had sales people on the streets across Japan offering free DSL modems to anyone who signed up.

The move by Softbank was all the more impressive because at the time the Japanese telecom market had severely limited competition. The few independent carriers usually pegged their prices just a fraction below those of NTT, and for the conservative Japanese consumer, lower prices were never enough of a draw to attract big numbers away from the stability, size and reliability that NTT stood for, but Softbank's offer was too good to pass up.

Softbank's bold move into Japan's DSL market symbolized the way it has done business ever since: It's not afraid to take on the big players, it's used to not being taken seriously at first, it's favorite tools are pricing and technology, and CEO Masayoshi Son has no problem making big financial bets on acquisitions to get the company where he wants it. Thursday's news that the company is in negotiations with Sprint to make what could be a "substantial investment" -- or even an outright acquisition, according to a report in the Japanese business newspaper Nikkei -- of the third-largest U.S. carrier is in line with Softbank's strategy.

The company began life in 1981 as a distributor of computer software and publisher of computer magazines. For its first decade it kept to the software and publishing business, but a series of expansions began in the early nineties and picked up pace from the middle of that decade when it acquired a stake in then start-up Yahoo. Within months, Softbank's shareholding had risen to over 37 percent of the company -- a bet that fueled Softbank's business expansion as Yahoo shares climbed.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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