Japanese cellphone company Softbank Corp. was in talks Thursday about
taking a substantial ownership stake in struggling U.S. carrier Sprint
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. Sprint
shares rose 72 cents, or 14.3 percent, to close at $5.76 Thursday.
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.
Sprint 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.
The company had a market capitalization of
$15 billion at Wednesday's close, implying that Softbank's reported
$12.8 billion bid won't be enough to buy the entire company.
expressed surprise at news of the talks. The U.S. wireless industry is
rife with speculation about mergers, as smaller players find themselves
struggling to compete, but the injection of a possible foreign investor
clouds the picture. Sprint has been in talks to buy various smaller
rivals, but an acquisition or major investment 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.
A takeover by Softbank would reward Sprint's shareholders and shore up its financials, however.
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.
Shares of MetroPCS, based in Richardson,
Texas, dropped 40 cents, or 3.3 percent, to $11.64, 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.
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.
of Clearwire Corp. jumped 92 cents, or 70.1 percent, to $2.22 on news
of the Softbank talks. Sprint owns half of the company, and investors
were betting that a deal with Softbank would include a buyout of
Clearwire. The company operates a wireless broadband network that Sprint
resells as "Sprint 4G." Clearwire has struggled to become a viable
standalone company, and it needs additional funding to upgrade its