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Softbank Eyes Sprint Acquisition

Ray Le Maistre
10/11/2012
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Japanese network operator SoftBank Corp. is believed to be in advanced talks to buy a majority stake in Sprint Corp. (NYSE: S) for US$12.8 billion, reports Bloomberg, citing the Nikkei newspaper.

SoftBank is reportedly discussing a deal that would see it take a 66 percent stake in Sprint, the third-largest mobile operator in the U.S. with more than 56 million customers.

Softbank issued a statement saying: "The story about SoftBank and Sprint Nextel Corporation being reported is based on speculation. We have not announced anything. We do not comment on speculation."

The rumor will add to the current uncertainty about the future of the U.S. mobile market, as Sprint had allegedly been looking at a bid for MetroPCS Inc. (NYSE: PCS), which is currently on course to merge with T-Mobile US Inc. . (See Sprint Could Counter-Bid for MetroPCS and T-Mobile, MetroPCS to Merge.)

The latest speculation comes shortly after SoftBank announced its intention to acquire fellow Japanese service provider eAccess Ltd. in a deal valued at about $2.3 billion. That deal, if completed, will see eAccess, which has about 4.2 million customers, merge with SoftBank Mobile Corp. , the third-largest mobile player in Japan with more than 30 million customers.

For more on Sprint, see:



— Ray Le Maistre, International Managing Editor, Light Reading

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krishanguru143
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krishanguru143,
User Rank: Light Beer
12/5/2012 | 5:19:20 PM
re: Softbank Eyes Sprint Acquisition




With someone looking into buying a stake into Sprint, I cannot see Sprint being able to acquire anyone at the moment.  I’m not sure Sprint could buy MetroPCS.  While they would need to beat $1.5 billion, Sprint only has around $6 billion in cash and financing the deal would add to their already $21+ billion in debt.  Their market cap is only $17 billion.




paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:19:17 PM
re: Softbank Eyes Sprint Acquisition


Ianbrown,


Confused on your comment and where it is going.  I assume you mean in opposition to:


http://www.lightreading.com/document.asp?doc_id=225526


seven


 

goundan
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goundan,
User Rank: Light Beer
12/5/2012 | 5:19:17 PM
re: Softbank Eyes Sprint Acquisition


How does Softbank majority ownership affect Sprint's US Gov contracts for telecom services? If they have to drop or spin off US Gov contracts due to Softbank majority ownership issues, then it is quite likely that Huawei gets its first tier 1 break in the US.

krishanguru143
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krishanguru143,
User Rank: Light Beer
12/5/2012 | 5:19:16 PM
re: Softbank Eyes Sprint Acquisition




No I didn’t, they go hand in hand.  If Softbank is looking at buying a controlling interest stake in Sprint, Sprint cannot be making any acquisitions.  Whenever a company is in takeover mode, they freeze hiring, acquisitions, etc.  The buyer is looking through the books and the last thing they want to see is books in fluctuation.  It also would harm the existing shareholders as if Softbank bought a 66% stake in the company and it was valued at a pre-MetroPCS buyout/merger but Softbank still got 66% ownership after the acquisition, then the existing 34% got the shaft.  In essence, Softbank just increased the value of their ownership stake while the existing shareholders saw a dilution.  The only time I saw where an acquisition and a merger took place at the same time, Verizon Wireless.  Vodafone and Bell Atlantic were merging their operations to form Verizon Wireless and Bell Atlantic was also going to buy GTE.  So pre-GTE Vodafone would own 55% of the new Company with Bell Atlantic owning 45%.  After the GTE acquisition, Bell Atlantic would own 55% and Vodafone would own 45%.

 

So if Softbank and Sprint are talking, then MetroPCS is off the table.  Sprint cannot afford to buy anything, their financials can’t handle it.  If it was an all-cash deal, it would get rid of over 25% of their cash reserves.  If they financed it, it would add to their existing debt and would surely drop their credit rating.  Even an all cash deal could drop their credit rating.  A drop in their credit rating, lower cash reserves, etc. could also either make Softbank ask for a higher ownership stake or they will pay less for their 66% stake.  Sprint could really only go after MetroPCS is Softbank agrees to it, but then Sprint is going to have to beat the offer DT has on the table.  This would certainly push the price Sprint would pay up as a bidding war would start.  You also have the board supporting the current T-Mobile/MetroPCS deal.  If Softbank wanted Sprint and MetroPCS, they would be better off bidding for the two separately.  So at the end of the day, you won’t hear anything about Sprint and MetroPCS.




paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:19:16 PM
re: Softbank Eyes Sprint Acquisition


One would think that Verizon Wireless (with its part ownership by Vodaphone) and T-Mobile (DT) should be able to provide you guidance to the US government contracts with wireless carriers partly or fully owned by organizations in friendly (read not China) countries.


seven


 

paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:19:15 PM
re: Softbank Eyes Sprint Acquisition


Well,  I do need to say my experience is different depending on the stage of the talking.  If they are in exclusive conversations, then yes talks with other parties are off the table.  If this is being floated as a trial balloon, then I would say Sprint could be talking to others.


For example, when AFC was bought by Tellabs we had just completed the Marconi NAA acquisition and in fact had our first round of Tellabs diligence done months before the Marconi deal.  We were talking to two other suitors than Tellabs but the Tellabs deal is the one that happened.  At that time, we were also talking to a COO (whose hire went on hold only after we had an LOI from Tellabs).  Normal front line hire/fire went on as normal during the entire process.  Only big things were put on hold.


Part of the reason is that bankers and companies approach management teams of reasonable companies all the time with deals.  Most of them are stillborn at the first discussion phase others actually have Corp Dev types talking and some of those move on to broader management discussions.  Only some of those move on to actual deal talks.  Until somebody ponies up a number its all foo foo.


seven


 

krishanguru143
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krishanguru143,
User Rank: Light Beer
12/5/2012 | 5:19:15 PM
re: Softbank Eyes Sprint Acquisition




But since we are talking about Sprint that still hasn’t digested Nextel entirely.  Given that Sprint has confirmed the talks, they appear to be well underway and still a lot needs to be discussed.  If Sprint got into a bidding war and won though, their finances could not handle an acquisition.  There could also be a penalty from MetroPCS from not going through, which would certainly add to any price that Sprint would have to pay.




krishanguru143
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krishanguru143,
User Rank: Light Beer
12/5/2012 | 5:19:15 PM
re: Softbank Eyes Sprint Acquisition




If Sprint did have to spin off the Gov’t contracts, I don’t Huawei would get a win.  The Gov’t could pull all funding for any public project that the non-Gov’t Sprint would be involved it.  Chances are, they would take the safe road and Huawei and ZTE would not be looked at as vendors.

 

Sprint does provide emergency responder service.  The Gov’t has a huge part of this service.  Sprint would see that business go away overnight; no public funding would be issued to them.




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