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A further consolidation of the telecommunications market is approaching; Japanese mobile carrier, Softbank (SFTBF.PK), is preparing to purchase Sprint Nextel (NYSE:S) for 1 trillion yen, or $13 billion, reported the Wall Street Journal Thursday.
It is still unknown whether Softbank will buy all of the company, or merely a two-thirds stake, and whether the talks will result in an actual deal remains unclear as well.
As the third-largest carrier in the United States, Sprint has faced declines in its revenue and subscriber base since its 2005 merger with Nextel. While an acquisition of Sprint would be a risk for Softbank, Japan’s third-largest carrier by subscribers, the company is seeking to expand its business outside the country. It would not be the first bet Softbank Chief Executive Masayoshi Son has made; the company purchased the Japanese arm of Vodafone (NASDAQ:VOD) in 2006. The deal was paid for through a leveraged buyout, but the company was able to enter the mobile-phone business.
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Competition has not been easy on Sprint. Even though beginning to carry Apple’s (NASDAQ:AAPL) iPhone last year has helped the company compete for contract customers, Sprint is approximately half the size of Verizon (NYSE:VZ) and AT&T (NYSE:T), each of which have more than 100 million subscribers and contract-customer turnover rates of about 1 percent, according to WSJ.
Shares of Sprint rose in early morning trading on Thursday, while Softbank’s shares fell 1.4 percent on the Nikkei Index.
While Sprint’s Chief Executive Dan Hesse has tried to turn the company around since he assumed the position in 2007, the stock still remains just above $5. When Hesse took over, the stock traded at $13 per share.
The offer from Softbank comes a week after Deutsche Telekom (DTEGY.PK) agreed to merge its U.S. wireless carrier, T-Mobile, with MetroPCS (NYSE:PCS) for $39 billion.
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