After days of rumors, the Japanese telecom Softbank announced it would buy a 70 percent stake of the American mobile carrier Sprint Nextel.
Two reasons this is important: Sprint had been overshadowed by mega companies Verizon and AT&T. When T-Mobile announced a merger with Mobile PCS, Sprint was left in a kind of nowhere land.
The Wall Street Journal reports that Softbank is the third-largest Japanese mobile provider. This acquisition gives Sprint some fresh cash and it would make Softbank one of the largest in the world.
The Journal adds:
“Softbank Chief Executive Masayoshi Son said he understands that some people are saying the move is too risky because the company would have to start from scratch in a totally new market.
“‘For us to not challenge ourselves may be an even greater risk,’ said Mr. Son, recalling how he took a big leap of faith as a 16-year-old when he moved to the United States to seek opportunities he didn’t think were available in Japan.
“At a joint press conference in Tokyo, Sprint Chief Executive Dan Hesse said: ‘There couldn’t be a better time for this infusion of cash,’ noting that the funds could be used to grow the business ‘both internally and externally.’ Mr. Hesse said Sprint’s board wants to ‘learn from Masa.’ Mr. Hesse will remain chief executive of the newly formed entity, New Sprint.”
The New York Times reports the deal is still subject to regulatory approval, but Sprint hopes to use that infusion of cash to try to compete against its bigger rivals.
The AP has a bit of background on Sprint’s financial situation:
“Sprint has struggled in recent years to compete with Verizon and AT&T. The company has $21 billion in long-term debt, and has launched a costly network restructuring and signed a long-term contract to buy $15.5 billion worth of iPhones from Apple Inc. over four years.”