The talks between Japan’s Softbank and Sprint Nextel Corporation(NYSE:S), for the former to pick up a controlling stake in the U.S. carrier has the potential to change the landscape of the telecoms market, a Bloomberg analysis said on Friday.
Not only will it park off a new round of consolidation in a segment that has been seeing a lot of unsteadiness of late, but the merger will create a viable entity that can take on the might of Verizon Wireless and AT&T.
The dominance of the wireless services market by the two large entities has been worrying regulators who fear a duopoly situation developing. The two companies, between them, control about three-fourths of the mobile phone market with contract customers.
Bloomberg said that Japan's third largest wireless carrier could take a 75 percent stake in Sprint, quoting people familiar with the matter.
The Nikkei newspaper had also pegged the size of the deal at $19 billion.
At a more micro level, for Sprint the deal means much-needed infusion of funds, which it can use for its ambitious and costly restructuring exercise.
It can also make a bid for Clearwire Corporation(NASDAQ:CLWR) that will give it more capacity for data transmissions, the Bloomberg analysis said.
Sprint has about 15 percent market share in wireless services and is the third largest network operator in the U.S.
Consolidation of the telecom sector has already commenced with Deutsche taking a controlling stake in T-Mobile USA.
Sprint is in needs of funds to expand its network and reach the kind of scale that both Verizon and AT&T enjoy.