Looks like the rumors were true: Softbank has agreed to acquire 70 percent of Sprint Nextel Corp. for U.S.$20.1 billion, in a newly created entity called New Sprint. Current Sprint shareholders will hold the remaining shares.
USA Today is reporting that U.S.$12.1 billion will be distributed to Sprint stockholders, while the remaining U.S.$8 billion in capital will be given to Sprint. The deal has been approved by the boards of directors of both companies and will next move to regulatory approvals. The deal is expected to close in mid-2013, and Softbank will capitalize New Sprint with U.S.$17 billion, making New Sprint a publicly traded company. According to Softbank, the capital intended directly for Sprint will be used to improve Sprint’s network and balance sheet, and Softbank will collaborate with Sprint to innovate consumer services and applications.
Yankee Group Senior Analyst Rich Karpinski comments
“We gave our take on this would-be deal when it was still a rumor, noting that the big question remains whether the U.S. market will eventually work its way down to a ‘Big Three’ operators. Not much has changed now that the deal has come to fruition. The biggest open question remains whether the likely additional consolidation needed in the U.S. market will come now, as this M&A door has opened, or later? Will the two deals currently on the table—T-Mobile acquiring MetroPCS and Softbank acquiring Sprint—go through as is or in the coming weeks will we see additional bids and counter-bids? Certainly both T-Mobile and Sprint boards are considering whether to shake things up further, but likely handcuffing both sides a bit is that even with just their current deals in place both operators face significant technical projects slated to be completed in the next year. Sprint must finish its Network Vision upgrade (and iDen shutdown) while T-Mobile launches its nationwide LTE network. The complexity of those undertakings could have both operators saying ‘good-enough’ on the M&A front—at least for now.
As for its aims as it moves forward, Sprint CEO Dan Hesse said on a conference call Monday his company could learn a lot from Softbank, which like Sprint is the number three operator in its market. On a slide from the Softbank portion of that presentation came a phrase that marks their shared goal: ‘disrupted duopoly.’ For Softbank, that means aggressively attacking NTT Docomo and KDDI; for Sprint, the target is AT&T and Verizon (while fending off an equally aggressive T-Mobile). With the first half of 2012 in the U.S. marked mainly by spectrum swaps and acquisitions, the rest of the deal will be dominated by the closing of these two deals.”
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