Softbank To Buy Majority Of Sprint Nextel

Japanese mobile phone company Softbank has announced it has agreed to buy 70 percent of Sprint Nextel for $20 billion. The deal would make Sprint Nextel a tougher competitor against its bigger rivals, Verizon Wireless and AT&T.

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STEVE INSKEEP, HOST:

NPR's business news starts with a telecom mega deal.

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INSKEEP: A big American phone company is about to become a big Japanese phone company. Early this morning, Sprint-Nextel, the third largest U.S. wireless carrier announced a deal with Softbank, which is a Japanese telecom and Internet company. Now the Japanese company is going to spend $20 billion to acquire a majority stake in Sprint.

NPR's Wendy Kaufman is following the story. And Wendy, why make this deal?

WENDY KAUFMAN, BYLINE: Well, the deal will give Sprint added financial muscle as it tries to compete with its much, much bigger rivals AT&T and Verizon. As you said, Sprint Nextel is the third-largest telecom, but it's a distant third, and it has had a really hard time competing.

for years of Sprint has been struggling on lots of different fronts and no one knew that better than the man who was brought in to fix the company in 2007. His name is Dan Hesse, an early this morning he spoke at a news conference in Tokyo.

DAN HESSE: Our brand was ranked last of the major U.S. carriers in every ranking. We needed to reverse subscriber trends. We were losing a million net customers every quarter. We needed to grow revenues. Revenues were declining, and again, declining at an accelerating rate.

INSKEEP: OK. That sounds pretty bad. But how does getting picked up by a Japanese company help that?

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KAUFMAN: Well, it helps them because it gives them $20 billion in cash and that is nothing to, you know, laugh at. They really needed the cash. So Softbank is going to buy some newly issued Sprint stock and more stocks from other investors at a huge premium to where the stock had been trading.

So let me tell you a little bit about Softbank. It is, as you said, a major Japanese telecom company. It is the third-largest wireless company in Japan. It is run by one of Japan's richest men, Masayoshi Son. He's known to have big ambitions, be a gambler in the business world, and he's talked about wanting to build one of the world's largest companies and wanting to move into the U.S. market. There is conjecture that this acquisition could ultimately help him gain other companies, including the acquisition of a company called Clearwire, which was started by one of the very earliest cell phone entrepreneurs.

INSKEEP: OK. So this man describes a kind of Japanese gambler has bought his way into the U.S. market, the price tag $20 billion. What kind of competition are they going to face as they try to build up Sprint Nextel?

KAUFMAN: They are going to have a very tough time. The big players in the wireless industry in the U.S. are, of course, Verizon and AT&T. The two of them have a combined 200 million customers. Sprint has about 55 million. Now Sprint has been trying to gain market share, but it's been hobbled by a disastrous merger with Nextel. It's trying to sort out a tangled two different network technologies. At the same time it's had to spend billions of dollars to build out its long-term evolution data network. Verizon and AT&T are far ahead in the so-called LTE technology, and that's what you need to support the big, fancy late to smartphones like the iPhone 5. And, of course, smart phones are becoming, you know, ever more expansive and important part of the technology world, here, and they want a piece of that.

INSKEEP: Well, I'm sure some of the 55 million Sprint Nextel customers are listening to this. What does this going to mean for consumers?

KAUFMAN: Well, it probably means a couple of things. In theory at least, it should allow Sprint to make its network more robust, and better and faster. I should tell you too, that Sprint investors are probably really happy because Sprint's stock has gone up sharply since the rumors of the deal first emerged last week. On the other hand, lots of people are sort of shaking their head and saying, why does Softbank want to do this? Why would you want to, you know, by a company that has been just struggling and is going up against to really tough rivals? And share prices of the Japanese stock has really fallen in the last few days. And so a lot of people are sort of shaking their head and saying well, they can understand why Sprint wanted the money but they can't understand why Softbank would want to buy it.

INSKEEP: Wendy, thanks very much.

KAUFMAN: OK, Steve. Thank you.

INSKEEP: That's NPR's Wendy Kaufman.

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