By Alexandra Burlacu | Oct 15, 2012 01:09 PM EDT
SoftBank has agreed to pay $20.1 billion to acquire a 70 percent stake in Sprint Nextel, creating the world's third-largest mobile phone operator by revenues.
The deal will reshape the U.S. wireless industry, granting Japanese telecoms group SoftBank control of the third-largest U.S. wireless operators by subscribers. The majority stake in Sprint Nextel also gives SoftBank CEO Masayoshi Son considerable influence of the industry at a time when every major operator is struggling to gain more spectrum.
SoftBank said it is paying $12.1 billion to Sprint shareholders and injecting another $8 billion into the company to strengthen its finances. It is the largest global deal this year and also the largest acquisition of a U.S. company by a Japanese buyer, reasserting Japanese companies as aggressive buyers in the global marketplace.
The deal also comes at a time when consolidation in the global telecoms industry is expected to pick up pace, as the shift to advanced mobile data services adds increasing pressure on carriers to build scale and meet rising capital spending requirements.
SoftBank said it will use Y700 billion ($8.9 billion) of its own cash and more than Y1.5 billion in bank bridging loans. The Japanese company will also add its expertise in high-speed mobile data communications to bolster Sprint's competitiveness in the U.S. market, said Son.
According to SoftBank, Sprint's chief Dan Hesse will remain CEO, but Son will be an "active" chairman from now on, participating in management to lend SoftBank's expertise to Sprint. Meanwhile, for Sprint the new deal means much-needed capital to improve its network and take part in the rapid expansion of broadband mobile data services.
Giants AT&T and Verizon currently dominate the U.S. market with a 30 percent and 32 percent share of the market, respectively, while Sprint holds only 16 percent.
"This is pro-competition and pro-consumer because it creates a stronger number three to compete with AT&T Wireless and Verizon," said Hesse at a news conference in Tokyo. "Over the long term I think we will see consolidation in the US industry and what this does is give Sprint the balance sheet and financial flexibility to play a larger role in consolidation in the future."
For SoftBank, meanwhile, the deal marks its first foray into a telecoms market outside Japan, and a major opportunity to take advantage of its experience in broadband mobile data.
"We invested at the best time, at the turning point [of Sprint's recovery]. I am confident that [the Softbank/Sprint merger] will succeed," Son said on Monday, Oct. 15.
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