(Corrects deal value in headline and first paragraph)
* Softbank says to buy up to 70 pct stake in Sprint
* Will pay $12.1 bln to Sprint s'holders, $8 bln in new
* Deal will be Japan's biggest overseas M&A
* Four banks approve $21.1 bln loans to Softbank - sources
* Softbank shares ended Monday down 5.3 pct
By Nadia Damouni and Taro Fuse
NEW YORK/TOKYO, Oct 15 Japanese mobile operator
Softbank Corp said it will buy up to 70 percent in
Sprint Nextel Corp, the third-largest U.S. carrier, for
about $20.1 billion - the most a Japanese firm has spent on an
The deal, announced jointly by Softbank's billionaire
founder and chief Masayoshi Son and Sprint CEO Dan Hesse at a
news briefing in Tokyo, will provide entry into a U.S. market
that still shows growth, while Softbank's home market is
stagnating. It will also give Sprint the firepower to buy peers
and build out its 4G network to compete better in a U.S.
wireless market dominated by AT&T and Verizon Wireless
, analysts have said.
While U.S. analysts have long said the telecoms industry
needs consolidation, few looked to Japan as a catalyst for that.
But Son, known for his risk-taking, is betting that U.S. growth
can offer relief from cut-throat competition for subscribers in
Japan's saturated mobile market. Combined, Softbank and Sprint
will have 96 million users.
Softbank said that as part of the deal it would buy $3.1
billion of bonds convertible into Sprint stock at $5.25 a share.
Sprint shares closed on Friday at $5.73.
Softbank shares tumbled more than 8 percent earlier on
Monday, and closed at their lowest in 5 months, down 5.3
percent. The stock has lost more than a fifth of its value - or
$8.7 billion - since news first broke late last week of the
firm's interest in Sprint. Investors are concerned that Son may
be offering too much to enter the United States
"There is always a risk when you face a big challenge," Son
said at the briefing. "It could be safe if you do nothing and
our challenge in the U.S. is not going to be easy at all. We
must enter a new market, one with a different culture, and we
must start again from zero after all we have built. But not
taking this challenge will be a bigger risk."
Four banks have approved loans totalling 1.65 trillion yen
($21.1 billion) to Softbank, three sources with direct knowledge
of the matter told Reuters earlier on Monday. Mizuho Financial
Group Inc, Sumitomo Mitsui Financial Group,
Mitsubishi UFJ Financial Group and Deutsche Bank
submitted a commitment letter to Softbank promising
the loans on Monday.
Sprint, which has lost money in all of the last 19 quarters,
has net debt of about $15 billion, while Softbank has net debt
of about $10 billion. Brokers have warned that the deal could
leave Softbank with "unacceptably high" gearing, a ratio of its
debt to shareholder capital. Standard & Poor's has warned the
deal "may undermine Softbank's financial risk profile" and would
pressure its free operating cash flow for at least the next few
The companies said Hesse would remain as CEO of Sprint.
"It's the same (market) reaction as when Softbank said it
was going to buy Vodafone a few years ago. Everyone came out and
said it was far too expensive," Fumiyuki Nakanishi, general
manager of investment and research at SMBC Friend Securities,
said ahead of the announcement.
Softbank bought Vodafone's Japan unit for $15.5
billion in a 2006 deal that propelled the firm into the mobile
carrier business. "Son made a company worth 3 trillion yen, and
now it will be worth 6 trillion yen. That's quite impressive,
and I think investors will realise he's making the right
decision down the road," said Nakanishi.
CLEAR FOR CLEARWIRE
Analysts have said that Softbank buying a 70 percent stake
in Sprint for $20 billion would imply the No. 3 U.S. wireless
company was worth about $28.6 billion, some two-thirds greater
than its market capitalization at Friday's close.
Sprint, which is going through a $7 billion upgrade of one
of its networks, while closing its Nextel iDen network, could
use some of the proceeds to buy the part of Clearwire Corp
it doesn't already own, analysts have said. Clearwire
has high-speed infrastructure that is attractive to mobile
carriers struggling with the increase in data due to the rising
numbers of smartphone users. Shares in Clearwire, 48
percent-owned by Sprint, soared on Friday.
An alliance with Sprint could also give Softbank leverage
when dealing with Apple Inc, helping bolster its
domestic position against KDDI Corp, which also offers
the iPhone in Japan, and market leader NTT Docomo,
which is yet to offer the Apple smartphone.
With Sprint in hand, Softbank may also look to acquire
smaller U.S. carrier MetroPCS Communications, Japanese
media have reported. Sprint has had a long interest in MetroPCS,
which earlier this month agreed to merge with T-Mobile USA, part
of Deutsche Telekom AG.
The Sprint deal takes outbound deals by Japanese firms to a
record $75 billion this year, Thomson Reuters data shows,
underscoring a strong appetite for overseas assets seemingly
unaffected by signs of slowing global growth.
This is not the first Japanese foray into telecoms overseas.
NTT Docomo racked up big losses after a string of failed
investments in names like AT&T Wireless and Taiwan mobile
operator KG Telecom in the late 1990s and early 2000s.
Raine Group LLC and Mizuho Securities were lead financial
advisers to Softbank.
($1 = 78.3550 Japanese yen)
(Additional reporting by Sophie Knight, James Topham, Andrea
Shalal-Esa and Mari Saito; Editing by Gunna Dickson and Ian