Japan's Softbank snaps up Sprint in $20 billion deal

Tue Oct 16, 2012 12:01pm EDT
 
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By Mari Saito and Tim Kelly and Nicola Leske

(Reuters) - Japanese mobile operator Softbank Corp said it will buy about 70 percent of Sprint Nextel Corp for $20.1 billion, giving Softbank the American toehold it has long desired and Sprint the capital to expand its network and potentially buy peers.

The deal for the third-largest U.S. wireless carrier represents the most a Japanese firm has spent on an overseas acquisition.

Announced by Softbank's billionaire founder and chief Masayoshi Son and Sprint Chief Executive Dan Hesse at a packed news conference in Tokyo on Monday, the transaction gives Softbank entry into a U.S. market that is still growing, while Japan's market is stagnating.

Part of the deal involves a direct infusion of billions of dollars into Sprint, giving it the firepower to buy peers and build out its 4G network to compete in a market dominated by AT&T Inc and Verizon Wireless.

Shares in one of those potential targets, Clearwire Corp, surged 12 percent to $2.60 in afternoon trading. Sprint owns 48 percent of Clearwire, and while Softbank said no action was required, most analysts and investors see a Sprint-Clearwire tie-up as an inevitable consequence of the Softbank deal.

One way or another, analysts have long said the U.S. telecommunications industry needed to consolidate, but few looked to Japan as a catalyst. Some investors and rating agencies worried that Softbank is biting off more than it can chew.

But the 55-year-old Son, a rare risk-taker in Japan's often cautious business circles, is betting U.S. growth can offer relief from cut-throat competition in Japan's saturated mobile market. Combined, Softbank and Sprint will have 96 million users.

"It could be safe if you do nothing, and our challenge in the U.S. is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built," Son told the news conference.   Continued...

 
An employee works behind a logo of Softbank Corp at its branch in Tokyo March 2, 2011. REUTERS/Toru Hanai