Softbank to buy up to 70pc of Sprint for US$20b

Japanese mobile operator Softbank Corporation said on Monday it will buy up to 70 per cent of Sprint Nextel Corp, the third-largest US carrier, for about US$20.1 billion – the most a Japanese firm has spent on an overseas acquisition.

The deal, announced jointly by Softbank’s billionaire founder and chief Masayoshi Son and Sprint CEO Dan Hesse at a packed news conference in Tokyo, will provide Softbank entry into a US market that still shows growth, while Japan’s market is stagnating.

It will also give Sprint the firepower to buy peers and build out its 4G network to compete better in a US market dominated by AT&T and Verizon Wireless , analysts have said.

Hesse said the Softbank investment would give Sprint opportunities it hadn’t had since he joined the firm in late-2007. “This is pro-competitive and pro-consumer in the US because it creates a stronger No 3 ... it competes with the duopoly of AT&T and Verizon. When you look at what Softbank has accomplished in Japan with the No 3 carrier, it’s something we can learn from,” he said.

While US analysts have long said the telecoms industry needs consolidation, few have looked to Japan as a catalyst. But 55-year-old Son, known for his risk-taking, is betting that US growth can offer relief from cut-throat competition for subscribers in Japan’s saturated mobile market. Combined, Softbank and Sprint will have 96 million users.

Softbank said that as part of the deal it would buy US$3.1 billion of bonds convertible into Sprint stock at US$5.25 a share, w h ile about 55 per cent of current Sprint shares would be exchanged for US$7.30 per share in cash, with the transactions to be completed by mid-next year. Sprint shares closed Friday at US$5.73.