U.S. Justice Department Has Just Given The Green Light To Sprint And T-Mobile Merger; Softbank Is Launching A Second Massive Tech Fund; Trump: Will Reciprocate On French Digital Service Tax
ASHER: The third and fourth largest wireless carriers in the U.S. has struck a deal with the Justice Department to complete their merger. Shares of Sprint and T-Mobile are rallying. The two companies argued they need to merge in order to take on Verizon and AT&T. AT&T, by the way, of course, owns CNN. Brian Fung is following this story from Washington for us. So Brian, just walk us through the terms of this deal.</s>BRIAN FUNG, CNN TECH REPORTER: Yes, let's talk a little bit about what is going to happen as a result of this settlement involving the Justice Department. Sprint, T-Mobile and Dish Network, which is going to become the nation's new next fourth wireless carrier by picking up Sprint, and it's prepaid segments including Boost Mobile and Virgin Mobile. Now, that's not the only thing that's happening here. As a result of the settlement agreed with D.O.J., Sprint and T-Mobile will -- the new T-Mobile will give Dish access to its network for a period of seven years. That's to help the new carrier owned by Dish gain traction as it tries to become a viable fourth competitor here. Now, we also have, you know, about nine million of these subscribers shifting from Sprint to Dish and I think, you know, one big question moving forward is going to be is that going to be enough subscribers to really make Dish a viable fourth here, particularly because these subscribers are going to be prepaid subscribers, not postpaid subscribers which tend to be a little bit more lucrative and valuable for a wireless carrier.</s>ASHER: Okay, so Dish is going to benefit. The only question is how much will they benefit? But in terms of what the new T-Mobile has to gain, obviously Sprint has been struggling, so the new T-Mobile, what do they have to gain in terms of being able to compete with AT&T, which is number one in America, and Verizon, which is number two.</s>FUNG: Well, was the result of this deal, the new T-Mobile will have about 92 million subscribers, that's about as many as AT&T currently has at 93 million. So, it really puts T-Mobile within striking distance of some of the big two wireless carriers in the United States. And T-Mobile says with this deal, it will be able to spread next generation 5G mobile data to across the United States on a much faster basis than it would otherwise. Now, you also have a group of states that are suing to block this deal saying that's not what's going to happen here that in fact, prices are going to go up over the long term because you now have a reduction competition due to the fact that T-Mobile has now gotten bigger, and the fourth competitor Dish is much smaller.</s>ASHER: Brian Fung. Thank you so much. Softbank is launching a second massive tech fund. This one will be called Vision Fund 2 and will be done without money from the Saudi Kingdom. Instead, the likes of Apple, Foxconn, Microsoft and the Kazakhstan will contribute more than $100 billion to invest in startups working specifically on artificial intelligence. The First Vision Fund has been a resounding success. Profit is actually up more than 300 percent in the fiscal year -- in the last fiscal year. Its greatest hit so far might actually be Uber. The Vision Fund made a big bet at a discount while Uber was going through a series of PR problems. It paid off when Uber finally went public earlier this year. It also actually has a slice of Slack as well. The fund actually bought into Slack at about $5 billion valuations since its IPO. Slack is worth more than three times that. The Vision Fund was also in early on WeWork. Reports say WeWork could be aiming to go public this fall. It would be the year's second biggest IPO, only behind Uber. Jerry Colonna is a venture capitalist who built some of the original tech investment funds working with Softbank back in the 90s. His book is called "Reboot: Leadership and the Art of Growing Up." Jerry, I have to say first of all, I really thoroughly enjoyed your book, we'll get to that at a different date though, but --</s>JERRY COLONNA, COFOUNDER AND CEO, REBOOT: Well, thank you.</s>ASHER: When it comes to specifically, this Vision Fund 2, just walk us through the investment strategy because there is a target on AI. Why?</s>COLONNA: I think it's pretty obvious that AI and more specifically machine learning represent the future of technology. It represents the future of innovation, if you will. And Masayoshi Son has always been on the leading edge and way out in front. Sometimes a little scary, sometimes a little risky, but always been out in front in recognizing what the next trends are coming.</s>COLONNA: And I think he did it in Vision 1. And I think he's going to do it again in Vision 2.</s>ASHER: So how much control will the founders actually have over the investment strategy now that they're obviously not going to be working with Saudi Arabia anymore?</s>COLONNA: I don't know the terms of the LP agreement. I don't know the terms that they have here. But it would surprise me if there's any dramatic change in Vision 2 than there was in Vision 1.</s>ASHER: So, how did this Vision 2 -- actually both funds really changed the relationship between startups, corporations, and investors? Walk us through that.</s>COLONNA: Yes, I think that that's the thing to really focus on here. What we're talking about is a magnitude of investment in that, you know, 20 years ago, 30 years ago, when I started in this business, we weren't talking about these numbers, you know, $108 billion fund was just not something that was seen before. And with that kind of investing power, what you're seeing is significant investments $10 billion investments at a time, that really alter the trajectory and the timeframe it takes to launch a business. This really challenges and changes the way the normal trajectory for a company to unfold, and then there's a corollary challenge, of course, which is it challenges leaders, it challenges the business leaders to grow in different ways in a much more rapid pace.</s>ASHER: So what effect does that have on Silicon Valley culturally?</s>COLONNA: I think that's really a fascinating question right now. One of the biggest concerns I would have and to be clear, one of the things I do right now is I coach many of these CEOs. And one of the challenges that they all have, is that we're raising the ante. We're raising the definition of what does it mean to be successful? And so if I take a -- I mean, it sounds wonderful, if I take $100 million investment in a third round of investment in my company, I have to have a significant exit in order to generate a return on investment for my investors to satisfy the LPs who are in this fund, let alone the folks who are driving Softbank Vision 2. That changes the dynamic and one of the concerns I would have is, are we then forcing inadvertently, unconsciously forcing, kind of the worst behaviors that we have seen of late in Silicon Valley, where there's just a heavy, heavy emphasis on return on investment and less of an emphasis on building a long-term sustainable and ultimately ethical responsible business?</s>ASHER: All right, Jerry Colonna, live for us, thank you so much. Appreciate it. Have a great weekend.</s>COLONNA: Thank you for having me.</s>ASHER: You're welcome. Okay, so tech titans, Google and Amazon capped off a busy week for FAANG stocks. Google parent, Alphabet shocked investors with better than expected earnings. The rebound from a weak first quarter has actually -- shares up 10 percent. Amazon, a surprise too, ended a full quarter streak of record profits after spending more than $800 million in the second quarter speeding up shipping for Prime members. The miss has shares down, you can see here at around one and a half percent. Clare Sebastian is joining us live now to talk about Amazon more specifically. So, when you think about just how much Amazon has been spending, just what they're spending trajectory has been that's really hurt them when it comes to profit.</s>CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: So this quarter was yes, it was all about the one day shipping. As you say, they spent more than $800 million, more than is crucial, because $800 million is what they projected it would cost and has proved to be more expensive. They've said because of transitioning in their fulfillment centers, because of moving product nearer to customers. All of this is a seismic shift to the vast distribution network. The CFO compared it to when they first launched Fulfillment by Amazon when they move beyond books and media into a broad range of products that they sell now. So, this is a big issue. Plus they say they're only in the middle of this journey. This is going to go on for multiple quarters. The profit deceleration is something of a big deal. Because is this taking us back, Zain, to the kind of a high growth, high investment, slightly lower profit model that Amazon has really come to define. And I think that's why we see the share price down a little bit today. We had become used to the profits going up for a number of quarters now.</s>ASHER: And Amazon is also one of obviously many tech companies that are facing regulatory scrutiny. Obviously, that's not necessarily impacted in these specific results, though.</s>SEBASTIAN: No.</s>ASHER: We didn't see that.</s>SEBASTIAN: They barely mentioned it. But that doesn't mean it's not a cloud on the horizon. Certainly, we've seen this week with the FTC fine that was leveled on Facebook. There were rumors that the FTC might be looking into Amazon. We know the Department of Justice has launched a broader investigation into Big Tech and antitrust concerns.</s>SEBASTIAN: Plus, we had the Treasury Secretary Steven Mnuchin this week saying singling out quite starkly Amazon saying that it had ruined retail. That it was responsible for the demise of multiple smaller retailers. So, clearly Amazon is in the sights of the administration. But for now, I think in the short term, certainly for investors, the bigger challenge there is how they going to maintain their market leadership position and how much they're going to have to spend to do that.</s>ASHER: And let's talk about Donald Trump tweeting today. Guys, can we put up the tweet? Actually, Donald Trump tweeted about France's digital tax on American companies. I actually can't read that without my contact lenses. The font is so small, but Clare, Donald Trump is basically talking here about the fact that France has just leveled a digital tax on several great American companies. He is talking about retaliating. Walk us through how he plans to retaliate. I mean, obviously, he didn't mention specifics, but what are his options?</s>SEBASTIAN: Well, he kind of did. He said, his last sentence there, he said, "I've always said American wine is better than French wine." From the subtext, of course, the President doesn't drink. But I think that the implication there is that since it's clear that the French law, the three percent levy on the biggest tech firms unfairly in his eyes targets American companies, given that they are the biggest. He wants to retaliate by the implication being putting a tariff on French products. Now, this is in theory possible. The U.S. has launched a Section 301 investigation into this this digital tax. That's the same kind of investigation that allowed them to put tariffs on Chinese goods. It's about unfair commerce discriminating against American companies. So you know, this is a possibility. Does this now set up another front in this global trade war that we're seeing? I think that's the big question.</s>ASHER: Clare Sebastian, live for us. Thank you so much. All right. Still to come here on QUEST MEANS BUSINESS. Welcome to Hong Kong, 15,000 protesters stage a sit-in at one of the world's busiest airports as the standoff with the government shows no signs of slowing down. That's next.