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Sprint, Softbank Hold Buyout Talks

Thu, 10/11/2012 - 7:25am
Maisie Ramsay

Sprint has confirmed that it is holding buyout talks with Japanese operator Softbank after rumors of the negotiations surfaced this morning. 

"Sprint is currently engaged in discussions with Softbank regarding a potential substantial investment by Softbank in Sprint," Sprint said in a statement. "Although there can be no assurances that these discussions will result in any transaction or on what terms any transaction may occur, such a transaction could involve a change of control of Sprint."

Sprint said it will not comment further on the potential Softbank merger "unless and until an agreement is reached." 

Reports from The Wall Street Journal and Reuters peg the price tag for Sprint at $12.81 billion. The transaction would provide Softbank with a substantial foothold in the United States, a top market in the global telecommunications industry.

"Sprint’s tremendous focus on customer satisfaction would fit well with Softbank’s approach to the market," Analysys Mason analyst Steve Hilton said in emailed comments. "Traditionally Japanese companies have a very results-oriented approach to dealing with customers. Use of customer satisfaction statistics to drive improvement  - long the hallmark of Sprint under CEO Dan Hesse - would fit well with Softbank’s approach."

Hilton also pointed out in email comments that both companies use CDMA, "possibly affording some cost savings from larger purchase volumes from network vendors." 

Bernstein Research analyst Craig Moffet expressed skepticism about the wisdom of the potential deal.

"It has been reported that Softbank's principal interest here is in spectrum.  If so, then the deal would be more analogous to a Japanese investment in U.S. real estate than it would to a strategic investment in a wireless operator," he said in a research note. "Cross-continent investments in telecom generate no synergies."

If Softbank were to take a stake in Sprint, the operator would become the country’s third major wireless provider to be at least partially owned by a foreign carrier. T-Mobile USA is owned by Deutsche Telekom, and Vodafone holds a partial stake in Verizon Wireless.

Sprint is weighing its strategic options in the wake of T-Mobile's merger with MetroPCS, a transaction that left it with one less option to acquire spectrum as it works to turn around its business.

Today's speculation about the Softbank buyout follows reports that Sprint considered a counter offer for MetroPCS at a board meeting last Friday. The latest word on that rumor is that Sprint's board decided to hold off on a new MetroPCS bid while it evaluates other alternatives. Some have speculated that Sprint may wait until T-Mobile closes the MetroPCS acquisition, and will then file a bid for the combined company. 

Sprint has not confirmed any of those reports.

T-Mobile's purchase of MetroPCS strengthens its fourth-place position, increasing competition for Sprint. T-Mobile and MetroPCS hold licenses in the same PCS and AWS bands, allowing T-Mobile to quickly leverage MetroPCS spectrum for its LTE network. 

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