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Sprint To Sell More Than Two-Thirds of Company to Japan’s SoftBank

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for a recap of the biggest channel-impacting mergers in Q3 2012 or here for the biggest M&A during that time in the service-provider and BSS/OSS spaces.**

SoftBank, the Japanese company which operates the third-largest wireless carrier in that Asian nation, is buying 70 percent of Sprint Nextel Corp. for $20.1 billion. The Monday morning announcement confirms speculation raised last week when it was reported that the two companies were in advanced merger talks.

Breaking down the transaction, $12.1 billion will be distributed to Sprint stockholders and the remaining $8 billion of new capital will go to strengthen Sprint’s balance sheet.

Sprint, the third-largest wireless carrier in the U.S., says the cash infusion and SoftBank’s expertise in the deployment of next-generation networks will “create a stronger, more competitive New Sprint that will deliver significant benefits to U.S. companies.” The boards of both companies have signed off on it; now it needs the support of Sprint stockholders as well as customary regulatory approvals. If all goes well, the deal should close in mid-2013.

This transaction provides an excellent opportunity for SoftBank to leverage its expertise in smartphones and next-generation high speed networks, including LTE, to drive the mobile Internet revolution in one of the worlds largest markets,” said Masayoshi Son, SoftBank chairman and CEO. “As we have proven in Japan, we have achieved a v-shaped earnings recovery in the acquired mobile business and grown dramatically by introducing differentiated products to an incumbent-led market. Our track record of innovation, combined with Sprints strong brand and local leadership, provides a constructive beginning toward creating a more competitive American wireless market.”

Sprint will continue to be headquartered in Overland Park, Kan., but will officially go by the name New Sprint. Dan Hesse will maintain his role as CEO and as a board member.

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 Hesse. “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.”

Sprint is behind in the LTE race, only debuting its first 4G markets this past summer; however, the company has had a strong year that obviously made it an attractive target for SoftBank’s investment. Sprint’s stock price has doubled in 2012, and many of the subscribers it lost have returned thanks in large part to the company’s decision to commit billions of dollars to Apple’s iPhone late last year. Sprint struggled for years after an unsuccessful purchase of Nextel in 2005. AT&T and Verizon Wireless each have since grown their subscribers numbers to approximately double Sprint’s number.

The deal with SoftBank does not require Sprint to take any actions involving Clearwire Corp., but the cash infusion certainly gives the carrier some options. Sprint already owns a little less than half of Clearwire the wireless and fixed broadband provider and many industry analysts think this will give Sprint the opportunity to buy the rest of the company, which owns valuable spectrum that the carrier could use to better compete in the 4G race.

“The only reason we see for Sprint to take new capital today would be to roll up the 50 percent of Clearwire it doesnt own. While we believe Clearwire needs additional funding, we believe Sprint would have to pay a substantial premium for control as other board members need to agree before Sprint can buy more shares,” J.P. Morgan’s Philip Cusick noted, as quoted by the Wall Street Journal.


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