TOKYO: Japanese mobile operator Softbank Corp. said it will buy about 70 percent of Sprint Nextel Corp, the third-largest US carrier, for $ 20.1 billion — the most a Japanese firm has spent on an overseas acquisition.
The deal, announced by Softbank’s billionaire founder and chief Masayoshi Son and Sprint Chief Executive Dan Hesse at a packed news conference in Tokyo on Monday, gives Softbank entry into a US market that is still growing, while Japan’s market is stagnating.
It also gives Sprint the firepower to buy peers and build out its 4G network to compete in a market dominated by AT&T Inc. and Verizon Wireless.
Shares in one potential target, Clearwire Corp, surged 21 percent to $ 2.81 yesterday.
Sprint owns 48 percent of Clearwire. While Softbank said no action was required, most analysts and investors see a Sprint-Clearwire tie-up as an inevitable consequence of the Softbank deal.
One way or another, analysts have long said the US telecommunications industry needs to consolidate, but few looked to Japan as a catalyst. Some investors and rating agencies worried that Softbank is biting off more than it can chew.
But the 55-year-old Son, a rare risk-taker in Japan’s often cautious business circles, is betting US growth can offer relief from cut-throat competition in Japan’s saturated mobile market. Combined, Softbank and Sprint will have 96 million users.
“It could be safe if you do nothing, and our challenge in the US is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built,” Son told the news conference.
“But not taking this challenge will be a bigger risk.”
Softbank said that as part of the deal, it will buy $ 3.1 billion of bonds convertible into Sprint stock at $ 5.25 a share, while about 55 percent of existing Sprint shares would be exchanged for $7.30 per share in cash, with the transactions to be completed by mid-2013.
Sprint added 0.4 percent to $ 5.75 on Monday after surging last week on the first reports of a pending deal.
The offer, while at a substantial premium, is still less than some observers had hoped for.
A fund manager at T. Rowe Price, a top-15 Sprint shareholder, told Reuters last week he thought Sprint would be worth $10 a share in 18 months.
Hesse, who will stay on as Sprint CEO, said the Softbank investment would give Sprint opportunities it hadn’t had since he joined the firm in late-2007, and enable the US firm to play a bigger role in future market consolidation.
“This is pro-competitive and pro-consumer in the US because it creates a stronger No. 3 ... it competes with the duopoly of AT&T and Verizon. When you look at what Softbank has accomplished in Japan with the No. 3 carrier, it’s something we can learn from,” he said.
Hesse, one of the few corporate CEOs in America to star in his own company’s TV commercials, also acknowledged the financial challenges Sprint has faced — which the new capital could fix quickly.
“Sprint has been engaged in turnaround since 2008. We have been at a disadvantage due to our debt,” he said on an investor call Monday morning.
But it was not all serious, as the American took some time for a bit of levity with his Asian counterparts. At the press conference, Hesse noted it was the first time he had seen his long-time acquaintance Son with a tie on.
Softbank shares tumbled more than 8 percent on Monday before closing down 5.3 percent to their lowest finish in five months. The stock has lost more than one-fifth of its value — or $8.7 billion — since news first surfaced late last week about its interest in Sprint.
On Monday, credit rating agency Moody’s said it was reviewing Softbank’s ratings for a possible downgrade, but some analysts said Son’s gamble might pay off in the end.
“It’s the same (market) reaction as when Softbank said it was going to buy Vodafone a few years ago. Everyone came out and said it was far too expensive,” Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities, said ahead of the announcement.
Softbank bought Vodafone’s Japan unit for $ 15.5 billion in 2006.
“Son made a company worth 3 trillion yen, and now it will be worth 6 trillion yen. That’s quite impressive, and I think investors will realize he’s making the right decision down the road,” said Nakanishi.
Four banks — Mizuho Financial Group Inc, Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group M and Deutsche Bank — have approved loans totaling 1.65 trillion yen ($ 21.1 billion) to Softbank, three sources with direct knowledge of the matter told Reuters.
Sprint, which has lost money in its last 19 quarters, has net debt of about $ 15 billion, while Softbank has net debt of about $ 10 billion.
Brokers have warned the deal could leave Softbank with “unacceptably high” gearing — a ratio of debt to shareholder capital.
Standard & Poor’s has warned the deal “may undermine Softbank’s financial risk profile” and pressure its free operating cash flow for the next few years.
Reflecting the concerns, Softbank’s 5-year credit default swap spreads — the cost of protecting its debt against default — widened to 267/327 basis points from around 160 basis points before the deal, and yields on its yen bonds have risen sharply.
Analysts have said the Softbank acquisition of 70 percent of Sprint for $20 billion would imply the No. 3 US wireless company is worth about $28.6 billion, some two-thirds more than its market capitalization at Friday’s close.
Sprint is going through a $ 7 billion upgrade of one of its networks, while closing its Nextel iDen network, which makes Softbank’s capital especially useful. But the Clearwire question looms large as well.
Macquarie analyst Kevin Smithen, in a note to clients, described Softbank as the “white knight” that could give Clearwire management and investors a successful exit, though he also warned the company may drive a hard bargain in negotiations.
An alliance with Sprint could also give Softbank leverage when dealing with Apple Inc, helping bolster its domestic position against KDDI Corp, which also offers the iPhone in Japan, and market leader NTT Docomo, which has yet to offer the Apple smartphone.
With Sprint in hand, Softbank may also look to acquire smaller US carrier MetroPCS Communications Inc, Japanese media have reported.
Sprint has long had an interest in MetroPCS, which earlier this month agreed to merge with T-Mobile USA, part of Deutsche Telekom AG.
The Sprint deal takes outbound deals by Japanese firms to a record $ 75 billion this year, according to Thomson Reuters data, underscoring a strong appetite for overseas assets seemingly unaffected by signs of slowing global growth.
This is not the first Japanese foray into telecoms overseas. NTT Docomo racked up big losses after a string of failed investments in names like AT&T Wireless and Taiwan mobile operator KG Telecom in the late 1990s and early 2000s.
Raine Group LLC, a boutique merchant bank focused on the technology, media and telecoms sector, and Mizuho Securities were lead financial advisers to Softbank.
Softbank snaps up Sprint in $ 20 bn deal
Softbank snaps up Sprint in $ 20 bn deal
World must prioritize resilience over disruption, economic experts warn
- Al-Jadaan said that much of the anxiety dominating markets reflected a world that had already been shifting for years
- Pointing to Asia and the Gulf, Al-Jadaan said that some countries had already built models based on diversification and resilience
DAVOS: Saudi Arabia’s Finance Minister Mohammed Al-Jadaan urged policymakers and investors to “mute the noise” and focus on resilience, as global leaders gathered in Davos on Friday against a backdrop of trade tensions, geopolitical uncertainty and rapid technological change.
Speaking on the final day of the World Economic Forum in Davos, Al-Jadaan said that much of the anxiety dominating markets reflected a world that had already been shifting for years.
“We need to define who ‘we’ are in this so-called new world order,” he said, arguing that many emerging economies had been adapting to a more fragmented global system for decades.
Pointing to Asia and the Gulf, Al-Jadaan said that some countries had already built models based on diversification and resilience. In energy markets, he pointed out that the focus should remain on balancing supply and demand in a way that incentivized investment without harming the global economy.
“Our role in OPEC is to stabilize the market,” he said.
His remarks were echoed by Saudi Arabia’s Minister of Economy and Planning Faisal Alibrahim, who said that uncertainty had weighed heavily on growth, investment and geopolitical risk, but that reality had proven more resilient.
“The economy has adjusted and continues to move forward,” Alibrahim said.
Alibrahim warned that pragmatism had become scarce, trust increasingly transactional, and collaboration more fragile. “Stability cannot be quickly built or bought,” he said.
Alibrahim called for a shift away from preserving the status quo towards the practical ingredients that made cooperation work, stressing discipline and long-term thinking even when views diverged.
Quoting Saudi Arabia’s founding King Abdulaziz Al-Saud, he added: “Facing challenges requires strength and confidence, there is no virtue in weakness. We cannot sit idle.”
President of the European Central Bank Christine Lagarde stressed the importance of distinguishing meaningful data from headline noise, saying: “Our duty as central bankers is to separate the signal from the noise. The real numbers are growth numbers not nominal ones.”
Managing Director of the IMF Kristalina Georgieva echoed Lagarde’s sentiments, saying that the world had entered a more “shock prone” environment shaped by technology and geopolitics.
Director General of the World Trade Organization Ngozi Okonjo-Iweala said that the global trade systems currently in place were remarkably resilient, pointing out that 72 percent of global trade continued despite disruptions.
She urged governments and businesses, however, to avoid overreacting.
Okonjo Iweala said that a return to the old order was unlikely, but trade would remain essential. Georgieva agreed, saying global trade would continue, albeit in a different form.
Georgieva warned that AI would accelerate economic transformation at an unprecedented speed. The IMF expects 60 percent of jobs to be affected by AI, either enhanced or displaced, with entry-level roles and middle-class workers facing the greatest pressure.
Lagarde warned that without cooperation, capital and data flows would suffer, undermining productivity and growth.
Al-Jadaan said that power dynamics had always shaped global relations, but dialogue remained essential. “The fact that thousands of leaders came here says something,” he said. “Some things cannot be done alone.”
In another session titled Geopolitical Risks Outlook for 2026, former US Democratic representative Jane Harman said that because of AI, the world was safer in some ways but worse off in others.
“I think AI can make the world riskier if it gets in the wrong hands and is used without guardrails to kill all of us. But AI also has enormous promise. AI may be a development tool that moves the third world ahead faster than our world, which has pretty messy politics,” she said.
American economist Eswar Prasad said that currently the world was in a “doom loop.”
Prasad said that the global economy was stuck in a negative-feedback loop and economics, domestic politics and geopolitics were only bringing out the worst in each other.
“Technology could lead to shared prosperity but what we are seeing is much more concentration of economic and financial power within and between countries, potentially making it a destabilizing force,” he said.
Prasad predicted that AI and tech development would impact growing economies the most. But he said that there was uncertainty about whether these developments would create job opportunities and growth in developing countries.
Professor of international political economy at the University of New South Wales in Australia, Elizabeth Thurbon, said that China was driving a Green Energy transition in a way that should be modeled by the rest of the world.
“The Chinese government is using the Green Energy Transition to boost energy security and is manufacturing its own energy to reduce reliance on fossil fuel imports,” she explained.
Thurbon said that China was using this transition to boost economic security, social security and geostrategic security. She viewed this as a huge security-enhancing opportunity and every country had the ability to use the energy transition as a national security multiplier.
“We are seeing an enormous dynamism across emerging market economies driven by China. This boom loop is being driven by enormous investments in green energy. Two-thirds of global investment flowing into renewable energy is driven largely by China,” she said.
Thurbon said that China was taking an interesting approach to building relationships with countries by putting economic engagement on the forefront of what they had to offer.
“China is doing all it can to ensure economic partnership with emerging economies are productive. It’s important to approach alliances as not just political alliances but investment in economy, future and the flourishment of a state,” she said.
The panel criticized global economic treaties and laws, and expressed the need for immediate reforms in economic governing bodies.
“If you are a developing economy, the rules of the WTO, for example, are not helpful for you to develop. A lot of the rules make it difficult to pursue an economic development agenda. These regulations are not allowing the economies to grow,” Thurbon said.
“Serious reform must be made in international trade agreements, economic bodies and rules and guidelines,” she added.
Prasad echoed this sentiment and said there was a need for national and international reform in global economic institutions.
“These institutions are not working very well so we can reconfigure them or rebuild them from scratch. But unfortunately the task of rebuilding falls into the hands of those who are shredding them,” he said.
WEF attendees were invited to join the Global Collaboration and Growth meeting to be held in Saudi Arabia in April 2026 to continue addressing the complex global challenges and engage in dialogue.
