#Asia Under Trump, SoftBank will invest half of its US$100B Vision Fund in the US

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President-elect Donald Trump announced the deal after meeting with SoftBank’s CEO

2016.12.07

NEW YORK, NY – DECEMBER 06: President-elect Donald Trump pauses with Masayoshi Son, the chief executive of SoftBank, at Trump Tower on December 6, 2016 in New York City. Trump announced that SoftBank has agreed to invest $50 billion in the United States and create 50,000 new jobs. Image Credit: Spencer Platt/Getty Images Israel

In a press conference timed for maximum benefit to both SoftBank and the incoming Trump administration, CEO Masayoshi Son stood alongside President-elect Donald Trump to announce that the Japanese company will invest US$50 billion in the US, with the goal of creating 50,000 new jobs.

Although the money will be budgeted out of an existing US$100 billion dollar fund that SoftBank operates with the Saudi Arabian government’s participation, the splash the disclosure created did wonders for SoftBank holdings’ stock prices, boosts Trump’s image as a job creator, and raises a lot of unanswered questions: not just about SoftBank’s plans in the US between now and 2020, but also what role Taiwanese electronics giant Foxconn may play.

Ahead of the meeting, Bloomberg reported that Son was going to meet with Trump to discuss, “as an investor,” new business opportunities in the US, including a possible Sprint acquisition of T-Mobile. Weeks before, SoftBank had announced the creation of the US$100 billion SoftBank Vision Fund with the Saudis’ involvement. (SoftBank announced earlier this month that the fund is oversubscribed and close to securing its initial US$100 billion total, of which US$30 billion is still being sought after.)

Also Read: Vision for the future: SoftBank sets new private fund for global tech startups

Some undisclosed amount of that was already going to go to US companies, but the figure of US$50 billion is a shock since it represents half the value of it. Son has since confirmed these figures, telling reporters that, “The US will become great again,” in an echo of Trump’s own campaign slogan.

Trump broke the news himself, tweeting it and then telling reporters the terms while Son beamed at the cameras. Trump also tweeted that Son told him, “he would never do this had we (Trump) not won the election!” Absent any comment or contradiction from SoftBank, it may well be that the decision was only formally made this week during their meeting.

The PowerPoint slide that Son held up, though, confusingly showed that the figures in question are actually US$57billion and 100,000 jobs to be realised over the next four years:

2016.12.07.1

Also Read: Ola to raise up to US$300M from SoftBank to give Uber a run for its money in India

Foxconn’s name is on the header of the slide, so perhaps they will be part of this, contributing US$7 billion and 50,000 jobs in the same span, but Trump did not mention them at all in his remarks, and neither did Son.

Foxconn did not reply to questions, nor did SoftBank, about this or any other aspects of the deal, including whether or not Foxconn is even involved. We will update this report if they do send replies.

Pivot from Asia

Foxconn is a frequent collaborator alongside SoftBank, participating in joint ventures throughout Asia. What it plans for the US is unclear, if there is any plan at all. Trump’s outreach to Taiwan across its perpetual state of diplomatic limbo, a long-planned move that has upset the People’s Republic of China, makes the question all the more salient given that Foxconn is based in Taiwan, but much of its manufacturing plant is in Mainland China.

Also Read: Grab appoints SoftBank, Goldman Sachs alumnus as President

That, though, could change in the next few years. Trump has promised to impose heavy tariffs on manufacturers that move significant capacity abroad. And last month, Nikkei Asian Review reported that Apple asked Foxconn, as well as Pegatron, to evaluate the cost/benefit of moving some capacity to the US. Even Mainland Chinese companies are evaluating moving factories to the US, hoping to benefit from generous subsidies and, under Trump, a policy platform that’s made bringing jobs back from abroad a top priority.

Political is personal

Trump’s injection of himself into the deal is unusual for presidential politics, though standard for his own style. He has been up front in meeting with companies or lecturing them about what they ought to do. This includes the manufacturer Carrier, where Trump and the management reached a deal to keep some jobs in the US in exchange for a federal tax break. (And, left unsaid, the ability of Carrier’s parent, United Technologies, to bid for federal contracts.) Conversely, Trump recently savaged Boeing on Twitter over the cost of building a new Air Force One: Boeing’s stock lost US$550 million worth of value as a result.

Meanwhile, shares of Sprint, which SoftBank owns, and T-Mobile, which Sprint wants to acquire, spiked after he appeared alongside Son at Trump Tower. If Sprint will benefit otherwise from the deal, it is not clear just how. The fourth largest wireless operator in the US has been struggling despite adding new subscribers last year, suffering heavy losses and struggling to regain market share against T-Mobile.

Also Read: Grab raises US$750M in oversubscribed round led by SoftBank

Could the SoftBank plan for US operations help it? It could, but neither SoftBank nor the incoming Trump Administration have released specifics. There are two areas where they might clash or come together.

3 + 4 = 3

Son has made it no secret that he wants Sprint, the fourth largest US wireless carrier, to acquire T-Mobile, ranked third, which would create a new entity. It would still be ranked third in the US wireless market after AT&T and Verizon, but stand much closer to AT&T’s second-place seat. The FCC and Justice Department (DOJ) balked at such a move in 2014, but Son hasn’t given up, and Trump will be able to appoint new heads to those agencies.

Trump could appoint people who prove friendly to the deal, though he previously said he’d oppose a proposed AT&T and Time Warner merger because the new entity would be too big. But telecom executives believe they’ve read the tea leaves correctly about Trump. In their minds, despite his campaign talk, a Trump DOJ and FCC will be friendly to them with de-regulation and pro-M&A attitudes, including, per AT&T CEO Randall Stephenson, the US$85 billion merger between his company and Time Warner.

Also Read: Grab to raise around US$600M from Didi and SoftBank: Bloomberg

The other issue is jobs. Last year, Son announced that Sprint would lay off employees as part of a US$2 billion cost-cutting move and had cut “several thousands of jobs” in the US as of May. The company let go at least 2,500 people, but then also hired 1,300 new employees in the wake of the move. Given Trump’s campaign promises and micromanaging on job cuts, SoftBank would probably not be able to make further cuts easily without drawing widely publicised ire.

If some of those 50,000 jobs go to Sprint, though, then the company would probably be assured favourable treatment and tax breaks.

The article Under Trump, SoftBank will invest half of its $100 billion Vision Fund in the US first appeared in Geektime.

The post Under Trump, SoftBank will invest half of its US$100B Vision Fund in the US appeared first on e27.

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