Friday, October 12, 2012

Clearwire Corporation (NASDAQ:CLWR) Up 92%, Sprint Nextel Corporation (NYSE:S) Up 12% On Acquisition Talks

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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