The third-largest U.S. wireless carrier
Sprint Nextel Corp
) is in talks for a potential ownership stake sale to the Japanese
cellphone company Softbank Corp. The company is in negotiations to
sell about 70% of its stake to Softbank for $12.8 billion.
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Sprint is in the midst of a 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 (LTE) technologies, and eventual
termination of the Nextel platform (iDEN business). Though the
company has enough liquidity to address the growing costs of the
network upgrade, iPhone subsidies, debt maturities and working
capital requirements, yet it is in need to bolster its liquidity
position for certain buyout.
The potential transaction would provide Sprint the financial
support to build and improve its competitive wireless network.
Additionally, the company would be able to shore up its balance
sheet and potentially buyout
), in which it already holds about 48% ownership, by raising new
Although there is no guarantee of the deal, it could involve a
change of control of Sprint. Further details of the deal have not
been disclosed. The shares of Sprint jumped 14.3%, while
Clearwire's shares surged 71% following the news.
The Softbank-Sprint deal would be the fourth biggest deal on earth
this year and could also change the dynamics of the whole wireless
industry, which has been dominated by the two carriers -
Verzion Communications inc.
). Following the transaction, the monopoly would be minimized with
Sprint also having one of the best networks.
Coming to Softbank, the deal would be highly beneficial as it is
exploring ways to enter the U.S. market to offset its weak domestic
operations. This would be the biggest international deal by a
We are maintaining our long-term Neutral recommendation on Sprint
with a Zacks #3 (Hold) Rank.