Softbank Deal to Buy Sprint Stake Announced

Investing

Published: October 15, 2012 4:49 am

Last Updated: October 15, 2012 5:20 am

The much anticipated deal for Softbank to buy 70% of Sprint Nextel Corp. (NYSE: S) was announced by the companies. The price was a bit higher than expected at $21.1 billion. Sprint shareholders will get a windfall they never expected as the number three wireless firm in the United States has been plagued by losses and a market share struggle with larger AT&T Inc. (NYSE: T) and Verizon Wireless.

The companies said Dan Hesse will remain CEO — despite his failure to turnaround Sprint. Part of the transaction will include a Softbank purchase of $3.1 billion of bonds convertible into Sprint stock at $5.25 a share.

Investors in Softbank are against the deal and have shown their displeasure by pressing its shares down more than 10%. Experts wonder how a Japanese firm with no U.S. operations can do what Sprint management has not been able to do — stop a slide that has continued since Sprint bought Nextel.

Some analysts believe that Softbank bought Sprint for access to is spectrum, but Sprint has had that access for years and has not been able to get anything from it.

Sprint investors may do well. Softbank investors will suffer for a long time while its management tries to make Sprint into a profitable enterprise.

Douglas A. McIntyre

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