There might soon be news of the biggest Japanese
acquisition in the history of America. Apparently, Japanese mobile carrier
Softbank is contemplating a purchase of controlling stake worth more than 1
trillion yen ($12.8 billion) in Sprint Nextel Corporation (NYSE:S) in order to
secure a position in the wireless market in the US. According to Sprint, the
deal has not been finalized, whereas a source states that Softbank is talking
to several banks to rake up funds for a bid.
On Thursday, Sprint shares went up 13%, hitting a
record high since summer of last year, whereas shares of wireless carrier Clearwire
Corporation (NASDAQ:CLWR) shot up 71%. According to Evercore analyst Jonathan
Schildkraut, if the deal with Softbank is successful, Sprint’s ongoing cost of capital
will be reduced and the company will get a financially stable partner. Even
today, CLW’s shares are up 9% to $2.42.
Sprint is currently the 3rd largest
carrier in the US ,
having a user base of 56 million as of June 2012. The market capitalization of
the company at Wednesday's market close came to $15.12 billion. The reason why
Sprint is pushing for a lucrative partnership is because it is in the process
of an expensive network upgrade.
But Wells Fargo analyst Jennifer Fritzsche said
that the would be beneficial for Softbank too as a collaboration with Sprint
will more or less guarantee a national presence in the country almost
immediately. Softbank will also be able to provide smartphones and mobile
devices at a lower rate after the deal goes through.
Reuters had got wind of a deal that Sprint was to
supposedly strike with MetroPCS Communications, but it merged with Deutsche
Telekom AG's and NTT Docomo. On the other hand, Softbank had declared that it
would surpass KDDI's 36 million users by almost 3 million after it acquires
mobile service operator eAccess at $1.84 billion. Thomson Reuters statistics
reveal that 642 cross-border transactions were made on behalf of Japan
last year, bringing the value of overseas deals up by 81% from 2010, to $69.5
billion.
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