Japan's Softbank to buy 70 per cent of Sprint for £12.5 billion

Japanese mobile phone company Softbank will buy 70 per cent of US telecoms firm Sprint Nextel for £12.5 billion, it was announced today.

During a news conference in Tokyo, Softbank's billionaire founder and chief Masayoshi Son and Sprint CEO Dan Hesse revealed a £12.5 billion deal that would make Softbank the third-biggest US mobile firm, behind AT&T and Verizon Wireless.

Industry insiders have said the deal is a steep one, as the loss-making Sprint has a net debt of $15 billion (£9 billion). However, Softbank chief Son said the company needs to spread its wings away from Japan's stagnating markets.

"We must enter a new market, one with a different culture, and we must start again from zero after all we have built. But not taking this challenge will be a bigger risk," he said in a briefing to investors and the media.

Son went on to say the investment made sense because the US is a world leader in smartphone sales, and its market is still growing. Softbank is expected to take full advantage of Sprint's 4G networks.

The company could make use of its TD-LTE experience as that's the LTE variant it has deployed in Japan. Time-Division LTE uses a single frequency for both sending and receiving data, allowing synchronised, but not simultaneous, communications.

Frequency-Division LTE (FDD-LTE) uses separate bands for sending and receiving, and is what most mobile operators use. However, TD-LTE is developing fast and has the advantage of not needing pairs of bands - and finding spectrum pairs can be problematic for mobile carriers. Softbank's Sprint acquisition would create a considerable market for TD-LTE equipment.

Softbank is known for its purchase of Vodafone PLC's Japanese arm in 2006 for $15.5 billion (£9.6billion), which left the company with heavy debt loads. However, its acquisition paid off as the company is now estimated to be worth nearly £50 billion.

Softbank was the first carrier to offer the iPhone in Japan, remaining the only one in initial years. The iPhone has been such a hit in Japan that it has shaped Softbank's brand image and spurred its success in that country.

Image credit: Flickr (ivva)