Softbank increases Sprint stake to 80%, while WSJ reports failed attempt to find Sprint buyer
Softbank bolstered its backing of U.S. operator Sprint, purchasing $87 million of outstanding stock in the company and increasing its ownership control to 80%.
The move comes on the heels of a reiterated backing of Sprint by Softbank CEO and Chairman Masayoshi Son and a report that Softbank had pulled back from intense efforts to sell its stake in Sprint.
Softbank reported that it purchased nearly 22.9 million new shares in Sprint at an average price of $3.80 per share for its $87 million, pushing its total ownership to nearly 3.2 billion shares. Softbank, which initially purchased a controlling stake in Sprint for $21.6 billion in mid-2013, said it does not expect to push its controlling interest past 85% that could trigger a possible delisting from the New York Stock Exchange.
The news sent Sprint’s stock (S) price up as much as 8% in after hours trading on Wednesday, with the carrier’s stock trading up 3% early Thursday at around $4 per share. Sprint’s stock late last month bottomed out at a new 52-week low of $3.10 per share, but has rallied over the past several weeks following new operational commitments from Softbank.
Son admitted during Sprint’s recent quarterly conference call that he had become disillusioned with his U.S. investment, but that he was now back on track in supporting its turnaround.
That disillusionment nearly drove Son to dump Sprint, according to a report from The Wall Street Journal. The report claims Son “put feelers out” for a potential buyer, but having found no takers redoubled his turnaround efforts.
Son previously stated he purchased Sprint with the intent to follow up with a purchase of T-Mobile US, with the combined operations expected to be a formidable rival to the market’s two largest mobile operators Verizon Wireless and AT&T Mobility. However, regulatory pressure scuttled a bid for T-Mobile US.
“I was thinking to myself, ‘I made one of the biggest mistakes in my life,’ which was the misjudgment of the U.S. regulatory environment,” Son told The Wall Street Journal.
While Sprint’s fiscal first-quarter results were not quite strong enough for Sprint to hold off T-Mobile US in the race for the market’s No. 3 position, the carrier did post some positive numbers that provided hope to investors. One of the more significant numbers was a dramatic dip in postpaid customer churn, which Sprint’s management said continued to build momentum into the early part of its fiscal Q2.
Sprint CEO Marcelo Claure said he expects the carrier to report positive postpaid “phone” growth in Q2, turning around what has been a sore point for the carrier. Claure’s confidence was based on the carrier’s well-received rate plans and improvements in network quality, which were at the core of Sprint’s customer defection crisis.
Claure, who replaced long-time Sprint CEO Dan Hesse last year, earlier this month signed a new employment contract that includes a chance to earn 10 million shares of Sprint stock. Claure has already made more than $22 million in his first nine months on the job, with his current $1.5 million contract set to expire on Aug. 18.
The new deal requires Claure to give up pay raises and long-term incentive bonuses in favor of shorter-term bonuses. The deal also stipulates the Sprint CEO must more than double the company’s stock from its current $3.85 per share to $8. The 10 million shares are meant to act as a “Turnaround Incentive Award Grant,” according to a Securities and Exchange Commission filing. The $8 value must take place “over any 150-day period during a four-year term from June 1, 2015, through May 31, 2019.”
Claure earlier this year purchased 5 million Sprint shares in a move that at least temporarily boosted investor confidence in the company. The purchase totaled $25 million and was priced at between $4.92 and $4.94 per share.
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