Softbank in talks to take 75% stake in Sprint Nextel

SOFTBANK IS in discussions to take a controlling stake in Sprint Nextel, as the Japanese telecoms group seeks to take advantage of the recent upheaval in the US wireless sector.

People familiar with the matter said they expected Softbank to take a controlling stake of up to 75 per cent in Sprint, which had a market capitalisation of more than $17 billion after shares surged 13 per cent yesterday.

Sprint is the third largest network operator by subscriber in the US mobile industry, which is undergoing rapid consolidation. Last week Deutsche Telekom’s T-Mobile USA announced a reverse takeover of MetroPCS, the country’s fifth largest mobile provider.

Sprint also considered a bid for MetroPCS earlier this year, but its board backed out at the last minute. Reports surfaced late last week that Sprint was considering reviving its bid, raising the possibility of a bidding war for MetroPCS.

A deal with Softbank would, however, probably diminish the possibility of a revived Sprint bid for Metro PCS, whose shares fell 4 per cent on Thursday. It would also mark the first ever overseas telecoms acquisition for the Japanese group, which was founded by the billionaire internet entrepreneur Masayoshi Son.

Sprint confirmed it was in talks with Softbank. “Although there can be no assurances that these discussions will result in any transaction or on what terms any transaction may occur, such a transaction could involve a change of control of Sprint,” it said in a statement.

One person familiar with the discussions said Softbank had been exploring ways to enter the US wireless market since this summer, and considered targeting other US wireless operators before settling on a bid for control of Sprint.

Sprint has struggled in the wake of its 2005 merger with Nextel Communications, but has begun to turn around under a management team led by Dan Hesse, chief executive.

Analysts were puzzled by Softbank’s motivations. “While getting the backing of Softbank would certainly improve Sprint’s financial position and resources, it wouldn’t improve the company’s operational position materially, given Softbank’s lack of existing US assets,” said Barclays Capital analyst James Ratcliffe.

According to people familiar with the matter, Softbank is also considering acquiring full control of Clearwire, a high-speed internet provider in which Sprint has a 49 per cent stake. Clearwire’s stock surged 32 per cent on the news, although it was unclear if Softbank would pursue the deal in tandem with its bid for Sprint or at a later date.

Softbank’s bid for Sprint will likely face scrutiny from the Committee on Foreign Investment in the US, a government body that assesses the national security implications of foreign acquisitions into the US. – (Copyright The Financial Times Limited 2012)