Softbank, Japan's third-largest mobile carrier, said Monday it plans to acquire a major stake in U.S. carrier Sprint Nextel, in a deal that will both extend Softbanks's reach into the U.S. mobile market and give Sprint a competitive boost against rivals AT&T and Verizon.
The deal, through which Softbank will pay $20.1 billion for a 70 percent stake in Sprint, has been approved by both companies' boards, with an expected closing date set for mid-2013. Softbank said it plans to pay $12.1 billion to Sprint shareholders for its stake in the company, coupled with an additional $8 billion in new capital intended to "strengthen Sprint's balance sheet."
News of the deal comes just four days after Sprint confirmed it was holding talks with Softbank to discuss a potential merger. It also comes on the heels of German telecom firm Deutsche Telekom announcing a deal to merge its T-Mobile USA unit with rival U.S. carrier MetroPCS.
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Sprint, which is currently the third largest carrier in the U.S. after AT&T and Verizon, said the $20.1 billion deal, along with Softbank's "deep expertise" in next-generation LTE wireless solutions, will make it a stronger, more competitive player in the U.S. carrier market.
"This is a transformative transaction for Sprint that creates immediate value for our stockholders, while providing an opportunity to participate in the future growth of a stronger, better capitalized Sprint going forward," said Sprint CEO Dan Hesse, in a statement. "Our management team is excited to work with SoftBank to learn from their successful deployment of LTE in Japan as we build out our advanced LTE network, improve the customer experience and continue the turnaround of our operations."
Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, agreed that Sprint gaining access to Softbank's 4G LTE technologies will boost its standing in the U.S. market.
"Given the incredible capital outlays required to build out LTE and beyond networks, this acquisition makes perfect sense," Moorhead said in an emailed statement to CRN. "Sprint needed the cash and was not able to go any further into debt and Softbank is looking for growth. On paper, it's a good marriage, particularly that they utilize the same network standard, CDMA."
Sprint reported an operating loss of $629 million during its second-quarter earnings announcement in July, as it continued to struggle against AT&T and Verizon. Sprint shares jumped 2.1 percent to $5.85 upon its announcement of the Softbank deal Thursday, according to Forbes.
PUBLISHED OCT. 15, 2012
