Softbank Buys $20 Billion Stake In Sprint-Nextel

Japan's Softbank has announced it will spend $20 billion to take a majority stake in Sprint-Nextel. The deal will provide Sprint, the third largest carrier in the U.S. market, with some much needed cash. It also gives Softbank the opening it's been looking for to break into the U.S. market.

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MELISSA BLOCK, HOST:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

And we begin this hour with ALL TECH CONSIDERED and some big tech news. Softbank, a Japanese mobile phone and Internet powerhouse, announced today that it's buying a controlling stake in Sprint Nextel. The price tag, slightly more than $20 billion. The deal is the largest foreign acquisition in Japan's history. Analysts say it will boost Sprint and increase competition in the U.S. mobile market. But as NPR's Steve Henn reports, Japanese investors are nervous.

STEVE HENN, BYLINE: Softbank will buy the majority of Sprint's outstanding stock for more than $7 a share and invest more than $8 billion in cash in the struggling U.S. carrier. For Sprint's customers, this deal is probably good news. Charles Golvin at Forrester Research says the scale of this combined company will guarantee Sprint access to the latest, hottest mobile gadgets and the cash should help Sprint build out a much faster network from coast to coast.

CHARLES GOLVIN: Given that Sprint has been the most consumer-friendly in terms of pricing for a smartphone service, that provides a good alternative to the dominance of AT&T and Verizon.

HENN: Sprint, the third-largest U.S. mobile carrier, had been hobbled by its disastrous 2005 merger with Nextel. That deal left Sprint with crushing debt and a mobile infrastructure that was a mess. For seven years, Sprint has been operating essentially two different cell phone networks that are completely incompatible with each other.

This deal will give Sprint the cash it needs to build out one consolidated high-speed network. And as it happens, it's the same kind of network Softbank's building in Japan. Chetan Sharma, a mobile analyst and consultant, says that means manufacturers of both mobile phones and telecom equipment will need to cater to this new global giant.

CHETHAN SHARMA: It just helps Sprint compete better in the U.S. market, which means that the pricing for data services, especially, will be more favorable for the U.S. consumer.

HENN: The combined company will be the third-largest mobile carrier in the world by revenue. But Softbank is a mobile industry upstart in Japan. It began mostly as an Internet company and moved into mobile telecom just six years ago. Back then, much like Sprint today, Softbank had a small slice of the market that was dominated by two strong competitors. But Softbank was able to gain exclusive rights to sell the iPhone in Japan, and now it's a major force there. Dan Hesse is Sprint's CEO.

DANIEL HESSE: When we look at what Softbank has accomplished in Japan with the number three carrier, it's something that we can learn from.

HENN: Softbank recently lost its iPhone monopoly in Japan, but its CEO, Masayoshi Son, remains determined to build a global leader. Masayoshi Son is an iconoclast in Japanese business. Unlike most of his peers, he's embraced mergers and accepted risk in order to grow. He's ethnically Korean. He was educated in the U.S., and he's unafraid to speak impolite truths.

MASAYOSHI SON: Every time I come to the U.S., I say, oh, my God, the mobile phone network is so slow.

HENN: Mobile phone speeds in Japan are, on average, twice as fast as they are here in the U.S. And Masayoshi Son says deploying new technologies here could help Sprint gobble up market share. But Japanese investors are dubious. Softbank's stock has plunged since news of this deal broke because if the merger goes through, the new company will have close to $40 billion in debt. And analysts agree, with that much debt, even a little mistake could prove financially disastrous. Steve Henn, NPR News, Silicon Valley.

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