Japanese mobile operator Softbank Corp said yesterday it will buy up to 70 per cent of Sprint Nextel Corp, the third-largest US carrier, for $20.1 billion – the most a Japanese firm has spent on an overseas acquisition.
The deal 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.
Sprint chief executive Dan HesseHesse 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 Softbank’s billionaire founder and chief Masayoshi Son 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 $3.1 billion of bonds convertible into Sprint stock at $5.25 a share, while about 55 per cent of current Sprint shares would be exchanged for $7.30 per share in cash, with the transactions to be completed by mid-2013.
Softbank shares tumbled more than eight per cent earlier yesterday, and closed at their lowest in five months, down 5.3 per cent. The stock has lost more than a fifth of its value – or $8.7 billion – since news first broke late last week of the firm’s interest in Sprint.
“It’s the same (market) reaction as when Softbank said it was going to buy Vodafone a few years ago. Everyone came out and said it was far too expensive,” Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities, said ahead of the announcement.
Softbank bought Vodafone’s Japan unit for $15.5 billion in a 2006 deal that propelled the firm into the mobile carrier business. “Son made a company worth three trillion yen, and now it will be worth six trillion yen. That’s quite impressive, and I think investors will realise he’s making the right decision down the road,” said Nakanishi.
Four banks have approved loans totalling 1.65 trillion yen to Softbank, three sources said. Mizuho Financial Group Inc, Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Deutsche Bank submitted a commitment letter to Softbank promising the loans yesterday. (Reuters)