Japan’s Softbank Corp. (9984) will buy a 70 percent stake in Sprint Nextel Corp. (S:US) for about $20 billion, CNBC reported, citing unidentified people familiar with the transaction.
The agreement calls for a direct purchase by Softbank from Sprint of $8 billion in stock and a tender offer for an additional $12 billion from holders, CNBC’s David Faber reported today. The tender offer price is $7.30 a share, CNBC said, or 27 percent more than Sprint’s Oct. 12 closing price of $5.73.
The deal is intended to revitalize the third-biggest U.S. wireless carrier into a more formidable competitor. With the investment from Japanese billionaire Masayoshi Son’s Softbank, Sprint can fund a faster expansion of its 4G wireless network and could make further acquisitions aimed at challenging Verizon Wireless and AT&T Inc. (T:US)
“This could be the final and most important piece to reposition Sprint to compete effectively with AT&T and Verizon,” said Walt Piecyk, an analyst with BTIG LLC in New York, in an interview last week.
Bill White, a spokesman for Overland Park, Kansas-based Sprint, declined to comment in an e-mail.
Tokyo-based Softbank is Japan’s third-largest mobile-phone company. Part of its direct purchase is a $3 billion convertible bond exercisable at $5.25, which will be sold before the transaction is completed to provide funding for Sprint, CNBC reported today.
Sprint Chief Executive Officer Dan Hesse has been working to fix the situation he inherited five years ago after the $36 billion purchase of Nextel. During Hesse’s tenure, 7.7 million contract customers left Sprint after a struggle to integrate the two companies led to complaints about network quality. Sprint ended up writing off about $30 billion, or 80 percent of the purchase price.
Sprint started offering its service on a faster network using LTE, or long-term evolution, technology in five cities in July, with plans to add more this year to catch up with its larger competitors. Verizon Wireless has the service in about 340 markets after starting its upgrades a year earlier.
Softbank, the fastest-growing Japanese mobile-phone provider, boosted earnings by more than sevenfold over the past four years as the first carrier in Japan to offer Apple Inc.’s iPhone. That helped it close the gap with larger NTT DoCoMo Inc. (9437) and KDDI Corp. (9433) AT&T was first to offer the iPhone and the U.S., with Verizon and Sprint adding it later.
Entering the U.S. allows Softbank to participate in a bigger market that’s still growing. Mobile-handset sales in the U.S. increased to 191 million units last year from 182 million units in 2007, according to data compiled by IDC.
In contrast, handset shipments declined to 38 million units in Japan last year from 52 million in 2007, according to IDC.
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