Japan’s Softbank snaps up Sprint in $ 20 b deal

Reuters: Japanese mobile operator Softbank Corp said it will buy about 70 percent of Sprint Nextel Corp for $20.1 billion, giving Softbank the American toehold it has long desired and Sprint the capital to expand its network and potentially buy peers.

The deal for the third-largest U.S. wireless carrier represents the most a Japanese firm has spent on an overseas acquisition.

Announced by Softbank’s billionaire founder and chief Masayoshi Son and Sprint Chief Executive Dan Hesse at a packed news conference in Tokyo on Monday, the transaction gives Softbank entry into a U.S. market that is still growing, while Japan’s market is stagnating.

Part of the deal involves a direct infusion of billions of dollars into Sprint, giving it the firepower to buy peers and build out its 4G network to compete in a market dominated by AT&T Inc and Verizon Wireless.

Shares in one of those potential targets, Clearwire Corp, surged 12 percent to $2.60 in afternoon trading. Sprint owns 48 percent of Clearwire, and while Softbank said no action was required, most analysts and investors see a Sprint-Clearwire tie-up as an inevitable consequence of the Softbank deal.

One way or another, analysts have long said the U.S. telecommunications industry needed to consolidate, but few looked to Japan as a catalyst. Some investors and rating agencies worried that Softbank is biting off more than it can chew.

But the 55-year-old Son, a rare risk-taker in Japan’s often cautious business circles, is betting U.S. growth can offer relief from cut-throat competition in Japan’s saturated mobile market. Combined, Softbank and Sprint will have 96 million users.

“It could be safe if you do nothing, and our challenge in the U.S. is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built,” Son told the news conference. “But not taking this challenge will be a bigger risk.”

Sprint is going through a $7 billion upgrade of one of its networks, while closing its Nextel iDen network, which makes Softbank’s capital especially useful. But the Clearwire question looms large as well.

An alliance with Sprint could also give Softbank leverage when dealing with Apple Inc, helping bolster its domestic position against KDDI Corp, which also offers the iPhone in Japan, and market leader NTT Docomo, which has yet to offer the Apple smartphone.

The Sprint deal takes outbound deals by Japanese firms to a record $75 billion this year, according to Thomson Reuters data, underscoring a strong appetite for overseas assets seemingly unaffected by signs of slowing global growth.

This is not the first Japanese foray into telecoms overseas. NTT Docomo racked up big losses after a string of failed investments in names like AT&T Wireless and Taiwan mobile operator KG Telecom in the late 1990s and early 2000s.