It’s official — Japan’s Softbank is buying a controlling interest in Sprint Nextel (S). The Japanese carrier will spend $20.1 billion to buy 70% of Sprint, paying the company’s shareholders $12.1 billion, and spending another $8 billion to pay down some of Sprint’s debt and provide cash for investment in network upgrades. The $12.1 billion payment to shareholders values the company at $17.2 billion, or about $5.75 per share.
The deal will leave AT&T as the only one of America’s four biggest carriers without a significant foreign investor. Verizon Wireless is 45% owned by the UK’s Vodafone and T-Mobile USA is 100% owned by Germany’s Deutsche Telekom.
T-Mobile’s plan to merge with MetroPCS may have hastened Sprint Nextel’s decision to become part of Softbank. Just two days after Deutsche Telekom announced its plan to merge T-Mobile USA with MetroPCS, Sprint’s board called a special meeting, sparking speculation that it was preparing to launch a counterbid for MetroPCS. Now it appears that the board probably wanted to accelerate talks that had already begun with Softbank.
Good news for towers, Clearwire?
Analysts expect Sprint Nextel to put the Softbank cash to work expanding and upgrading its network. “Towers should benefit from this additional spend,” says Wells Fargo’s Jennifer Fritzche. “While well-capitalized carriers are good for the entire tower sector, Crown Castle (given the past purchase of the Global Signal asset) has the most exposure to Sprint.”
Clearwire, 54% owned by Sprint, is also seen as a possible beneficiary of the deal. Analysts expect Clearwire to start spending on network upgrades, and also say that Softbank may buy the part of the company that Sprint does not already own.
Today Softbank CEO Masayoshi Son said that download speeds in the United States are much slower than in Japan, and that he believes he can deliver faster speeds to American customers through Sprint. He also said that he expects to bring the very best smartphones and tablets to Sprint because the combined companies will have significant leverage with device makers. Together, the companies will have 96 million subscribers, according to Son.
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