• Bloomberg


Softbank Corp. is in talks with Sprint Nextel Corp. over a “substantial” investment to take control of the Kansas-based company, in a move that could potentially reshape the U.S. telecommunications industry, two sources said Thursday.

Softbank, Japan’s third-largest mobile phone company, also plans to acquire MetroPCS Communications Inc. through Sprint Nextel, the Nikkei newspaper reported the same day, without citing its sources.

Softbank and Sprint Nextel are still negotiating over the price, and while about $6.50 per share has been discussed, no agreement has been reached yet, said one of the first-cited sources.

Sprint Nextel CEO Dan Hesse’s negotiations to align the company with Softbank could redraw the U.S. wireless landscape by creating a more viable competitor to Verizon Wireless and AT&T Inc. and sparking a new wave of consolidation.

In a statement confirming talks were taking place on a “substantial” investment from Softbank, Sprint Nextel said it couldn’t assure a transaction would occur and didn’t provide any other details. Softbank also confirmed the talks in a statement Friday to the Tokyo Stock Exchange.

The discussions involve Softbank taking a stake of as much as 75 percent in Sprint Nextel and providing capital for investments.

The Nikkei report said Softbank may invest around ¥1.5 trillion in the U.S. firm.

Such a deal would disrupt a wireless industry that is being increasingly dominated by Verizon and AT&T, a duopoly that has fueled government concern.

The transaction would give Sprint Nextel financial support to build a competitive wireless network with a chance of being the first company to offer the latest mobile devices, plus the means to buy control of Clearwire Corp. to increase its data transmissions capacity.

“This must be causing chills to run down the spines of AT&T and Verizon executives,” said Tero Kuittinen, an analyst at the Alekstra Oy mobile diagnostics company. “They are ripe for an aggressive new challenger to attack.”

Verizon and AT&T together control 75 percent of the market for U.S. contract customers, according to Goldman Sachs Group Inc., giving them economies of scale and the first shot at the latest smartphones that draw customers. Sprint Nextel has a 15 percent market share and T-Mobile USA Inc. 10 percent.

AT&T had exclusive rights to Apple Inc.’s iPhone for almost four years before Verizon and later Sprint Nextel were able to offer the gadget. Last year, AT&T had to abandon a $39 billion acquisition of T-Mobile USA because of opposition from U.S. regulators.

A new investor could help Hesse, 58, speed up his $7 billion network upgrade plan to catch up with his two bigger rivals, which have begun blanketing the U.S. with 4G wireless coverage. Sprint Nextel needs to improve its own technology to lure more users craving mobile video and faster download speeds, its ticket to growth as the wireless voice market has become saturated.

The company also could use newfound financial strength from a Softbank deal to gobble up smaller wireless companies, adding more airwaves to expand its capacity as users demand more Internet services.

Softbank may help Sprint Nextel acquire full control of Clearwire, a wholesale U.S. wireless carrier, though no decision on the matter has been made yet, one of the two sources said.

Sprint Nextel already owns 48 percent of Washington-based Clearwire, which has airwaves in the same frequency as Softbank and the same so-called TDD LTE variant of network technology.

A Sprint Nextel-Softbank deal could also create an operator financially strong enough to eventually bid for the assets of Deutsche Telekom AG’s T-Mobile USA, which is trying to combine with Texas-based wireless carrier MetroPCS Communications Inc., said another source familiar with Softbank’s plans. Deutsche Telekom said Oct. 3 it has agreed to merge its U.S. unit with MetroPCS.

Sprint Nextel is holding off on an immediate counterbid for MetroPCS to gain time to scrutinize the planned combination with T-Mobile USA, other sources said Wednesday. Softbank is looking to step in and buy MetroPCS once it has assumed control of Sprint Nextel, according to the Nikkei report.

Softbank’s investment in Sprint Nextel would include buying out some holders of the U.S. company’s publicly traded shares and supplying it directly with capital, the source said, adding Sprint Nextel could use the capital to develop its Long-Term Evolution network.

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