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Sprint, Japanese firm in talks over investment
NEW YORK — Sprint Nextel Corp. on Thursday said Japanese cellphone company Softbank Corp. is in talks about making a potential substantial investment in the U.S. company.
Sprint, the third-largest cellphone company in the U.S., said the deal could be big enough to involve a “change of control” of the company. It didn’t provide any other details.
The news sent Sprint shares as high as $6.04, the highest level since 2008. At the end of the day, the shares closed at $5.76, up 72 cents or 14 percent.
The Wall Street Journal, citing an unidentified person with knowledge of the talks, had reported earlier that the potential deal would help Softbank expand outside of Japan. It put the value of the transaction at more than $12.8 billion.
Sprint, which is based in Overland Park, Kan., is in a difficult competitive position. It has 56 million wireless subscribers, making it about half the size of market leader Verizon Wireless, and it keeps losing high-paying subscribers to Verizon and AT&T, the industry’s No. 2 player.
It also has $21 billion in long-term debt, and has embarked on a costly network restructuring and signed a long-term contract to buy $15.5 billion worth of iPhones from Apple over four years. Investor concerns over Sprint’s financial health have eased this year, however, and the stock has more than doubled since January.
Sprint had a market capitalization of $15 billion at Wednesday’s close, implying that Softbank may not buy the whole company.
Analysts expressed surprise at the news. There has been frequent talk of Sprint buying other U.S. cellphone companies to help it turn around, but an acquisition by a Japanese company wouldn’t do much to help its competitive position in the U.S.
“We would expect to see very little synergies created with such a transaction,” said Stifel Nicolaus analyst Christopher King.
Last week, media reports said Sprint’s board was considering a bid for MetroPCS Communications Inc., the fifth-largest cellphone company in the U.S., to counter an offer by T-Mobile USA, which ranks as No. 4. The T-Mobile-MetroPCS deal could make the competitive situation even more difficult for Sprint, which has been losing contract-signing subscribers for years.
Shares of MetroPCS, based in Richardson, Texas, dropped 39 cents, or 3.2 percent, to $11.65, as investors speculated that Softbank’s interest means there’s less of a chance for a counterbid from Sprint.
Tokyo-based Softbank, once the underdog in Japan’s telecom industry, has seen its fortunes improve ever since it started selling the iPhone in 2008. It was initially the only Japanese phone company to offer the iPhone. Rival KDDI Corp. started selling the iPhone late last year.
The U.S. wireless industry is no stranger to foreign investment, but the results have been mixed. T-Mobile is owned by German phone company Deutsche Telekom. With T-Mobile treading water, DT has tried to exit its investment by selling the subsidiary to AT&T. That deal was scuttled by U.S. regulators.
Vodafone Group PLC, a British cellphone company, owns 45 percent of Verizon Wireless. That’s been a successful investment, but New York-based phone company Verizon Communications Inc., which owns the rest, has complete control over the joint venture and is seen as having twisted Vodafone’s arm in an attempt to get it to let Verizon take complete ownership.
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