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

Japanese mobile phone company Softbank (opens in new tab) will buy 70 per cent of US telecoms firm Sprint Nextel (opens in new tab) 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 (opens in new tab) 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.

(opens in new tab)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. (opens in new tab)

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 (opens in new tab))