Telecom Lead America: Softbank has agreed to spend $20.1 billion to buy 70 percent stake in Sprint Nextel.
The investment is part of diversifying into high growth markets such as America. Softbank will utilize its innovation in smartphone, applications and LTE networks.
American mobile customers will benefit from SoftBank’s cash contribution, expertise in deploying next-gen wireless networks and track record of success in taking share in mature markets from larger telecommunications competitors.
The $20.1 billion investment will enable Sprint to leap into big league of telecom operators. Recently, TBR’s Networking and Mobility Practice said Sprint will struggle financially throughout 2013 despite increased revenue growth of 6.4 percent year-to-year in 2Q12, as the impact of Network Vision will offset the gains and result in a negative bottom line.
“As we have proven in Japan, we have achieved a v-shaped earnings recovery in the acquired mobile business and grown dramatically by introducing differentiated products to an incumbent-led market. Our track record of innovation, combined with Sprint’s strong brand and local leadership, provides a constructive beginning toward creating a more competitive American wireless market,” said SoftBank Chairman and CEO, Masayoshi Son.
Following the SoftBank transaction, Sprint will have $8 billion capital to enhance its mobile network and strengthen its balance sheet.
“This is a transformative transaction for Sprint that creates immediate value for our stockholders, while providing an opportunity to participate in the future growth of a stronger, better capitalized Sprint going forward,” said Dan Hesse, CEO of Sprint.
SoftBank is financing the transaction through a combination of cash on hand and a syndicated financing facility.
Softbank, during fiscal 2011, had reported 6 percent year on year increase in net sales at ¥3.2 trillion. Its net income rose 65.4 percent to ¥313.7 billion.
Sprint Nextel serves more than 56 million customers at the end of the second quarter of 2012.
Sprint will focus on LTE deployment, the decommission of the iDEN network, and on attracting new subscribers in 2H12 as the operator is working on the completion of Network Vision. Sprint will achieve improved margins in the long term, as 2014 will begin phase III of Network Vision, where cost savings of $10 billion will be realized through 2017.
Recently, TelecomLead.com reported that targeting LTE 4G spectrum, Japanese mobile service provider Softbank is set to buy eAccess for 180 billion yen (US$2.3 billion). Softbank is buying its small rival to improve its bandwidth and LTE services to compete with NTT Docomo and KDDI.
The acquisition will allow Softbank, the country’s third-largest carrier, to use eAccess’ bandwidth to expand its coverage to cope with the proliferation of data traffic as more people use smart mobile devices in the country, as well as move it closer to KDDI, the No. 2 carrier.
In June this year, SoftBank achieved more than 100,000 LTE 4G users. SoftBank launched commercial services earlier this year. Currently, SoftBank only offers one wireless hotspot device.