SoftBank to Acquire 70% Stake in Sprint Nextel

October 15, 2012. Sprint Nextel Corporation and SoftBank announced that they have entered into agreements that will give SoftBank a 70% stake in Sprint Nextel.

Sprint Nextel stated in a release that the two companies "have entered into a series of definitive agreements under which SoftBank will invest $20.1 billion in Sprint, consisting of $12.1 billion to be distributed to Sprint stockholders and $8.0 billion of new capital to strengthen Sprint’s balance sheet. Through this transaction, approximately 55% of current Sprint shares will be exchanged for $7.30 per share in cash, and the remaining shares will convert into shares of a new publicly traded entity, New Sprint. Following closing, SoftBank will own approximately 70% and Sprint equity holders will own approximately 30% of the shares of New Sprint on a fully-diluted basis."

Sprint Nextel added that "The transaction has been approved by the Boards of Directors of both SoftBank and Sprint. Completion of the transaction is subject to Sprint stockholder approval, customary regulatory approvals and the satisfaction or waiver of other closing conditions."

See also, video of October 15 news conference at which leaders of the two companies announced and described this transaction.

Softbank (Sofutobanku Kabushiki-gaisha) is based in Tokyo, Japan. It provides wireline and wireless telecommunications services, broadband internet access service, and numerous e-commerce and online financial, media, and technology services.

Masayoshi Son, Ch/CEO of Softbank, stated in the release that "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 world’s largest markets. 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 Sprint’s strong brand and local leadership, provides a constructive beginning toward creating a more competitive American wireless market."

The two companies also announced that Softbank will create a new U.S. subsidiary named "New Sprint", and that it will continue to have its headquarters in Overland Park, Kansas.

Sprint Nextel is the third largest telecom company in the US, measured by number of customers, behind Verizon and AT&T.

Dan Hesse, CEO of Sprint Nextel, stated at the news conference that this transaction is pro-competitive and pro-consumer. He said that it will enable the new company to more effectively compete against Verizon and AT&T.

Matt Wood of the Free Press, a Washington DC based interest group that frequently advocates regulatory intervention in telecom, internet and media markets, stated in a release that "Sprint offers consumers a competitive alternative to Verizon and AT&T's overpriced wireless services. Sprint and its partner Clearwire also facilitate the important low-priced and free offerings of many other small wireless competitors, including mobile virtual network operators like FreedomPop and Credo Mobile. These alternative carriers buy capacity from Sprint and Clearwire and it’s unclear how this deal will impact this important segment of the market."

He added that "SoftBank's investment in Sprint could be a net positive for consumers, but only if Sprint deepens its commitment to its wholesaling and competitive pricing strategies. However, in the long run this deal and other mergers cannot fix the structural barriers to competition that plague the U.S. wireless market. We need bold policies from the Federal Communications Commission that will usher in real competition, fair prices and innovative services."

(Published in TLJ Daily E-Mail Alert No. 2,462, October 16, 2012.)