JAPANESE mobile operator Softbank Corp said it will buy up to 70pc of Sprint Nextel Corp, the third-largest U.S. carrier, for about $20.1bn - the most a Japanese firm has spent on an overseas acquisition.
The deal, announced jointly by Softbank's billionaire founder and chief Masayoshi Son and Sprint CEO Dan Hesse at a packed news conference in Tokyo, will provide Softbank entry into a U.S. 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 U.S. market dominated by AT&T and Verizon Wireless , analysts have said.
Hesse 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 U.S. 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 U.S. analysts have long said the telecoms industry needs consolidation, few have looked to Japan as a catalyst. But 55-year-old Son, known for his risk-taking, is betting that U.S. 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 $3.1bn of bonds convertible into Sprint stock at $5.25 a share, while about 55pc of current Sprint shares would be exchanged for $7.30 per share in cash, with the transactions to be completed by mid-2013. Sprint shares closed Friday at $5.73.
Softbank shares tumbled more than 8pc earlier on Monday, and closed at their lowest in 5 months, down 5.3pc. The stock has lost more than a fifth of its value - or $8.7bn - 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 3 trillion yen, and now it will be worth 6 trillion yen. That's quite impressive, and I think investors will realise he's making the right decision down the road," said Nakanishi