Telecom services provider Sprint Nextel Corp. (S) Thursday confirmed having talks for sale of a major stake in the company to Japan's Softbank. Media reports earlier today said Softbank was in advanced talks to acquire a majority stake in Sprint for over $12.8 billion. Shares of Sprint gained about 15 percent on a more-than-average volume on the New York Stock Exchange.
Sprint's confirmation comes amid an euphoric merger deal between MetroPCS Communications Inc. (PCS) and T-Mobile USA, a part of Deutsche Telekom AG (DTEGY.PK). That deal is said to combine the U.S.'s fourth and fifth largest wireless carriers. Sprint was said to be weighing a possible rival bid for MetroPCS.
The news of Sprint's possible merger with Softbank also had a cascading impact on MetroPCS shares, which slid over 4 percent with investors somewhat apprehensive Sprint may abandon its bid for the latter.
Media reports aver that Softbank's deal with Sprint may involve a huge cash composition and probably a tender offer to purchase stock on the secondary market.
Sprint is in need of more spectrum to work on its 4G LTE network. The company is gaining pace in harmonizing network technologies and is striving to arrest decline in its topline and subscriber base arising from a failed 2005 merger with Nextel. Sprint CEO Dan Hesse recently said his company may take part in the consolidation process happening in the U.S. wireless sector.
Sprint in late July reported a wider loss for the second quarter, reflecting charges related to its Nextel network shutdown and subscriber losses.
Meanwhile, for Softbank, if a deal with Sprint goes through, it would signify a foray outside Japan. Softbank is not new to acquisitions. In 2006, the company bought Vodafone Group Plc's (VOD, VOD.L) Japanese unit, and takes pride in being first among its home mobile carriers to offer Apple Inc's (AAPL) iconic iPhone.
Softbank earlier this month said it will buy Japan's fourth-largest mobile carrier eAccess Ltd. for more than 180 billion yen, to expand the coverage of its Long-Term Evolution, or LTE, network. The company also plans to boost its handset lineup by expanding supplier base to include firms like Sharp Corp., Motorola Mobility Inc. and China's Huawei Technologies Co.
Shares of Sprint are trading at $5.79, up $0.75 or 14.95%, on a volume of 348 million shares on the NYSE.
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