JAPAN/FILE: Japanese mobile operator Softbank bids more than $12 billion to buy a majority stake in U.S. carrier Sprint

Record ID: 466634

  • Title: JAPAN/FILE: Japanese mobile operator Softbank bids more than $12 billion to buy a majority stake in U.S. carrier Sprint
  • Date: 12th October 2012
  • Summary: TOKYO, JAPAN (FILE - OCTOBER 14, 2011) (REUTERS) VARIOUS OF SOFTBANK PRESIDENT MASAYOSHI SON LAUNCHING IPHONE 4S AND WELCOMING CUSTOMER AT SOFTBANK STORE
  • Embargoed: 27th October 2012 13:00
  • Keywords:
  • Location: Japan
  • Country: Japan
  • Topics: Business,Communications,Science / Technology
  • Reuters ID: LVAGTO3T5DRF0P68CRIM586ABYW
  • Story Text: Japanese mobile carrier Softbank Corp is in talks to take over U.S. operator Sprint Nextel Corp, according to a source with direct knowledge of the matter.
    The deal, worth over 1 trillion yen ($12.8 billion) is an attempt for Softbank to expand overseas and overcome the 'Galapagos syndrome', a tendency for companies to remain in Japan and develop standards specific to Japan.
    In response to reports of a pending deal, Sprint said on Thursday (October 12) that it was in talks with Softbank on a "potential substantial investment" that could involve a change in control of the company. It said there was no assurance of a sale.
    A deal would give Sprint a much-needed partner with deep pockets whose backing would lower the company's cost of capital, analysts said. On the other side, Softbank would get the entry point to the U.S. market it has sought for months, which could help it counter stagnating growth in Japan.
    Sprint, whose market capitalization was $15.12 billion at Wednesday's market close, is the third-largest U.S. carrier, with more than 56 million users at the end of June. It is in the middle of a costly network upgrade that has led it to consider a range of partnerships.
    Sprint shares surged nearly 19 percent to $5.99 in morning trading, touching their highest levels in 16 months. Sprint bonds also jumped on heavy volume, and the coast of protecting that debt against default plunged sharply as investors priced in the prospect that a backer could pull Sprint's debt up to an investment-grade level.
    Softbank is in talks with several banks to borrow money to finance a bid, a source familiar with the matter told Reuters. One analyst said Sprint might be the Japanese company's only option if it has eyes on the American market.
    Forbes-ranked Japan's second-richest man Masayoshi Son founded Softbank in 1981.
    The company has grown from a packaged software distributor 30 years ago into a broad telecoms group worth more than $40 billion.
    The name is derived from 'software' and 'bank,' a reflection of its aspirations to play a role in the information age.
    It was also the very first mobile carrier in Japan to offer the iPhone in Japan.
    It lost that monopoly last year, when rival KDDI Corp, Japan's second largest carrier, also began offering the device. Softbank faces tougher competition at home against KDDI and market leader NTT Docomo.
    It took over Vodafone Japan in 2006.
    Sprint, led by CEO Dan Hesse, has been bleeding customers for years and is in the middle of a costly network modernization project.
    Japanese companies made a record 642 cross-border deals last year, according to Thomson Reuters data.
    Buoyed by a stronger yen, the value of all outbound deals rose to $69.5 billion, up 81 percent from 2010, also a record.
    The biggest foreign acquisition by a Japanese company to date was Japan Tobacco's 1.8 trillion yen buy of British-based tobacco firm Gallaher in 2007.
    Sprint has been considering whether to make a bid for smaller rival MetroPCS Communications which this month agreed to merge with Deutsche Telekom's T-Mobile USA, a source told Reuters this week.
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