Monday, October 15, 2012

Japanese telecom giant Softbank buys 70 percent of Sprint

Softbank buys 70 percent of Sprint (Image courtesy of AP)

It's confirmed. Rumors last week that hinted that Japanese telecom and Internet provider Softbank would purchase Sprint were true, mostly. Softbank and Sprint have announced that the company will soon own 70 percent of the third largest U.S. mobile carrier.

Japanese based SoftBank is officially entering the global market. It was announced earlier today that the third largest carrier in Japan is acquiring 70 percent of Sprint, the third largest carrier in the United States, for $20.1 billion (1.57 trillion Yen). The two companies had been rumored to have been in serious discussions late last week. With all the i’s dotted and t’s crossed today, Softbank President Masayoshi Son and Sprint Chief Executive Dan Hesse announced that the deal was completed.

The breakdown of the deal, as announced by both Sprint and SoftBank, will send $12.1 billion to the current Sprint shareholders. The remaining $8 billion of new capital will be used to “strengthen Sprint’s balance sheet.” SoftBank is offering $7.30 a share for existing shares, though Sprint’s stock had closed at $5.73 a share on Friday. Current Sprint stockholders will also receive 30 percent ownership in New Sprint. That’s right, a group of extremely intelligent and wealthy businessmen and investors hashed out a multibillion dollar transaction and the best name they could come up with is “New Sprint.”

The name appears to be the only negative in this deal, though, as both Sprint (old Sprint?) and SoftBank are looking at this acquisition as a win. For Sprint, it provides a sizable influx of cash that allows it to be competitive against Verizon and AT&T. It also gives the company the backing of an extremely successful entity that has built a network in the same way Sprint hopes to. It’s also a win for current Sprint CEO Dan Hesse, who will become CEO of New Sprint and sit as a board member.

For SoftBank, this move is a bit of global market consolidation that plants it firmly in a top spot on the worldwide playing field. Now sitting as the third-largest mobile provider in Japan and in the United States, SoftBank has more than 90 million subscribers. This marks the largest overseas acquisition by a Japanese firm to date. However, any transaction of this size comes with its potential pitfalls. Sprint may be a risky point of entry for SoftBank, taking control of a sputtering company in a market that is dominated by two seemingly immovable giants. The agreed upon merger between Deutsche Telekom’s T-Mobile and MetroPCS makes the market even more competitive toward the top. The deal has also placed SoftBank as “credit watch negative” by Standard & Poor’s, meaning it could see its credit rating downgraded. Of course, S&P made the same threat to the United States and that sure didn’t stop us.

SoftBank’s rise through Japan’s mobile market came on the back of being the first company in the country that carried the iPhone. It’s growth was only bolstered with acquisition after acquisition that put SoftBank in a position to make its biggest purchase yet with Sprint. Masayoshi Son will likely have to continue his aggressive ways to compete in the U.S. market. That doesn’t seem to be something he’s afraid to do. Leveraging SoftBank’s LTE knowledge will be a major key to the success of this transaction, as Sprint has been attempting to build out its network for some time to little avail thanks mostly to money issues. Sprint hopes to have LTE in 100 markets by the end of the year.


Source : http://www.digitaltrends.com/mobile/softbank-is-buying-70-percent-of-sprint-its-official/

0 comments:

Post a Comment