Japan's Softbank said Monday it has reached a deal to acquire a 70 percent stake in U.S. mobile operator Sprint Nextel for US$20 billion, forming one of the world's largest telecom operators.
The companies said the deal would allow aggressive Softbank to expand into the U.S. market and become a global force, with the new, combined entity becoming the third-largest operator in the world by revenue. The deal will also provide $8 billion in new capital to Sprint for its network and to shore up its finances.
"When you take a challenge, you take various risks. This challenge in America is not going to be easy," said Son Masayoshi, CEO of Softbank.
Analysts say the deal may lead to a shakeup of the U.S. mobile market, which is currently dominated by two large operators, AT&T and Verizon Wireless. Softbank, which first became a mobile operator just six years ago, has doubled its subscriber base in Japan using aggressive pricing and creative contracts.
The deal will provide a cash injection for Sprint, which like Softbank is still building out its high-speed network. The new entity will also be able to select from a range of technologies used in Japan to introduce to the U.S., such as touch-card payments and mobile TV, as well as reaping benefits from its new scale.
By acquiring Sprint, Softbank is likely make some economies of scale, as the iPhone is the core handset at both companies and both use Ericsson infrastructure, said an analyst report from Citigroup issued before the deal's official news announcement.
News reports in Japan have also said Softbank will use its position in Sprint to pursue a purchase of MetroPCS Wireless.
Softbank is relatively unknown outside of Japan but has a reputation as an aggressive Internet conglomerate at home, with a history of barging into new fields and undercutting its rivals with cheap prices, new services and oddball advertising - one of the company's spokesmen is a surly talking dog that has become a minor celebrity in the country.
Its broad holdings include large mobile and broadband subsidiaries, Internet properties such as Yahoo Japan and the Japanese UStream, and big investments in foreign firms such as U.S. social game provider Zynga and China's Alibaba Group. Softbank was founded in 1981 by its current CEO Masayoshi Son, a charismatic entrepreneur who had repeatedly made, and won, multi-billion dollar bets with his company in the past.
Softbank's history as a mobile operator only dates to 2006, when it purchased the struggling Japanese unit of Vodafone. Softbank immediately unleashed a barrage of advertising that included international superstars such as Brad Pitt, as well as offbeat commercials featuring talking cats and aggressive contract plans that set off a price war.
It was also the first of Japan's big three operators to embrace smartphones, and made another successful gamble in agreeing to Apple's strict purchasing and profit-sharing requirements to become Japan's exclusive iPhone provider until last year. Since entering the mobile business in April of 2006, Softbank has over doubled its subscriber base to 30 million, a period in which the Japan's overall number of subscribers has increased only 40 percent.
Softbank remains Japan's third-largest mobile carrier, but earlier this month announced it has agreed to acquire smaller domestic rival eAccess, which could vault it to number two in terms of subscriber contracts.
Rumors of a deal have been swirling since last week, when the companies said they were in negotiations after a host of news reports said Softbank would soon take a significant share of Sprint.
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