After winning the U.S. Federal Communications Commission's
Sprint Nextel Corp.
) and Japanese telecom company SoftBank have finally announced
the successful completion of their merger. The newly formed
entity will be known as Sprint Corporation and will continue to
trade with ticker symbol "S". SoftBank will own 78% of the new
Sprint while the remaining stake will be held by the existing
Sprint shareholders. We expect the merger to be a catalyst for
Sprint's growth as it strengthens the company's position against
telecom giants such as
Verizon Communications Inc.
Dish Network Corp.
) decision to stop pursuing Sprint was a boon in disguise for the
latter as it allowed SoftBank to modify its offer. In June,
SoftBank raised its bid offer to $21.6 billion from its initial
$20.1 billion offer in exchange of a 78% stake in Sprint, up from
the initial proposal of 70% holding. The revised offer
represented an increase of 35 cents per share in the purchase
price to $7.65 from $7.30.
We believe the influx of capital and a restructured balance
sheet will help Sprint accelerate expansion and strengthen its
future. Consequently, the SoftBank deal will remain accretive to
Sprint's multi-billion dollar restructuring program known as
Network Vision. Through this plan, the company is concentrating
on the core Sprint platform, which includes CDMA, WiMAX and
Long-Term Evolution technologies, and the eventual termination of
the Nextel platform (iDEN business).
Though the company has enough liquidity to address the growing
costs of network upgrade, iPhone subsidies, debt maturities and
working capital requirements, it needs to bolster its liquidity
position for future expansion. Further, this merger would also
facilitate development plans in Sprint's newly acquired company -
Clearwire Corp. The buyout, which was approved by Clearwire
shareholders on Jul 8, was made effective the next day.
Sprint has a Zacks Rank #3, implying a Hold rating.
DISH NETWORK CP (DISH): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
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