Sprint confirmed it is holding talks with Japanese hi-tech company Softbank, which could see Softbank making a “substantial investment” in the US number-three operator.
In a statement Sprint said that “although there can be no assurances that these discussions will result in any transaction or on what terms any transaction may occur, such a transaction could involve a change of control of Sprint”.
According to some reports, Softbank is looking at acquiring a two-thirds stake in Sprint, with the deal likely to be worth JPY1 trillion to JPY1.5 billion (US$13 billion to US$19 billion) in value. It was also suggested that Softbank may look to take control of Clearwire, the wholesale operator in which Sprint is a significant shareholder.
Sprint has recently been seen as a potential acquirer rather than a target, with the belief it is mulling making a bid for MetroPCS – the company which Deutsche Telekom is looking to merge with T-Mobile USA.
Last week, Softbank announced a deal to acquire EMOBILE, a Japanese mobile operator rival, in a move which would make it the second largest player in the country after NTT Docomo.
So far, it is unclear how much operational benefit Softbank will get from a deal with Sprint, other than as an investment. Craig Moffett, an analyst with Sanford C Bernstein, told the New York Times: “Unless they simply think they’re investing in US real estate, and it happens to be electromagnetic real estate that they’re buying, this is not a merger with anybody.”
It has been noted that overseas investments in the US telecoms industry have not generally been shrouded by success. Bloomberg noted that Deutsche Telekom’s T-Mobile USA is worth “one fourth less than it was a decade ago”; while NTT Docomo failed to benefit from an investment in a predecessor of AT&T’s mobile unit.
There are some positive precedents, though: Vodafone’s investment in Verizon Wireless has proved to be a positive for the Europe-based group, in spite of disputes over dividend payments.
And Softbank is also looking to make its investment at a time when Sprint’s valuation is already “relatively low”. In contrast, Telekom and Docomo made their investments when the market was at its peak.
Sprint said it will not be making any further comment “unless and until an agreement is reached”.