Softbank to buy 70 percent of Sprint for $20.1B

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Moody’s said Monday that it would consider upgrading Sprint’s credit rating as a result of the deal. Standard & Poor’s, another ratings firm, made a similar announcement last week. A higher credit rating would mean lower borrowing costs for Sprint.

Analysts also speculated that Softbank could buy out Clearwire Corp.’s shareholders and combine the company with Sprint. The Bellevue, Wash., company operates a wireless broadband network, but its network upgrades have been hamstrung by a lack of funds. Sprint already owns 48 percent of the company and resells access to its network as “Sprint 4G.” The speculation sent Clearwire’s stock up 16 percent on Monday. It has doubled since Wednesday.

Softbank shares fell 5.3 percent on the news, as Japanese investors worried that the company is making a huge gamble. The shares have fallen by a third over a week. Standard & Poor’s had placed Softbank on “credit watch negative,” meaning its credit rating could be downgraded.

The deal has been approved by the boards of both companies. It still needs approval from Sprint shareholders and U.S. regulators. Softbank said the transaction is expected to be completed by the middle of next year.

Analysts say buying a foreign cellphone company makes little sense in terms of operational synergies. There’s little opportunity to improve service by combining networks or saving money by combining operations.

But Son said the U.S. and Japanese markets have much in common now that smartphones are all-important in both countries, and the two companies could benefit and learn from each other. By joining forces, Sprint and Softbank will become one of the world’s top smartphone carriers, could negotiate better deals from the companies that make phones and network equipment.

Softbank was the first carrier to offer the iPhone in Japan. The iPhone has been such a hit in there that it has shaped Softbank’s brand image and helped it lure customers away from its two bigger rivals.

Son said Sprint and Softbank can work together to develop new technology for faster data networks. Softbank recently bought smaller Japanese rival eAccess, largely to gain access to the latest fourth-generation, or “4G” networks.

Son likes to take chances in a culture that doesn’t always reward risk. A graduate of the University of California, Berkeley, he was only 16 when he ventured alone to the U.S.

“I am happy to be able to tell you today of my big comeback to the U.S.,” he said. “This is going to be an even bigger challenge.”

Son has made no secret that he has been looking abroad for new growth as the Japanese mobile market has been stagnant for years. Softbank has been an exception in racking up strong profit despite such stagnation, largely due to the popularity of the iPhone.

The deal is the largest foreign acquisition ever by a Japanese company, and illustrates how the strong yen, which is usually seen as a negative for export-reliant Japan Inc., has boosted the overseas purchasing power of Japanese corporations as a stagnant domestic market pushes them to look abroad for growth.

Before Monday’s deal, the biggest overseas acquisition by a Japanese company was Japan Tobacco Inc.’s purchase of Gallaher Group of Great Britain in 2007 for about $19 billion.

The combination of Softbank and Sprint will tie with AT&T for world’s No. 3 mobile company by revenue after China Mobile and Verizon, according to Softbank.

The deal leaves three of the four national U.S. wireless companies with complete or substantial foreign ownership. Vodafone Group PLC of Britain owns 45 percent of No. 1 Verizon Wireless, and Deutsche Telekom AG of Germany owns T-Mobile USA outright.

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