Softbank of Japan Is Making Its Biggest Gamble Yet: Entering the American Cellphone Market

894 Words Mar 1st, 2015 4 Pages
SoftBank of Japan is making its biggest gamble yet: entering the American cellphone market.
SoftBank’s complex $20.1 billion deal to buy majority control of Sprint Nextel will unite Japan’s fastest-growing cellphone service provider with one of the United States’ most troubled. The idea is to provide Sprint with a stronger, deeper-pocketed partner that can help finance its network overhaul and, eventually, pursue additional mergers. But SoftBank, an Internet and communications company, is making a risky wager that it can break the dominance of Verizon and AT&T in the United States the way it did a similar duopoly that long reigned over the Japanese market.
“SoftBank brings so much more to Sprint than money,” Daniel R. Hesse, Sprint’s
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Mr. Son has said that he has already repaid much of the debt his company took on when it bought Vodafone’s Japan arm in 2006 and has done it well ahead of schedule.
The deal on Monday was a welcome development for the financial advisers involved in a year starved for deal activity. If completed, Monday’s transaction would be the biggest deal by a Japanese company in the United States in more than three decades, according to data from Thomson Reuters. It would also be the biggest deal so far this year involving a foreign investment in an American company.
It is also a model of complex financial maneuvering. SoftBank will initially pay $8 billion to acquire new shares of Sprint, infusing the company with much-needed cash ahead of looming debt maturities. It will then offer existing Sprint shareholders the chance to cash out some of their holdings for $7.30 each, a handsome premium to the stock’s current levels.
SoftBank would gain a 70 percent stake in Sprint, which would remain a publicly traded company. That would give Sprint additional flexibility to raise money or make acquisitions. And it would allow the transaction to close more quickly. The two sides expect it to be completed by the middle of 2013.
The pact signals a belief that more mergers are to come in the rapidly shrinking telecommunications industry. Two weeks ago, T-Mobile USA announced plans to merge with

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