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SoftBank of Japan Acquires Majority Stake in Sprint Nextel: Should Sprint Customers Be Concerned?

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Japanese telecommunications firm SoftBank confirmed Monday that it would buy 70% of Sprint Nextel for $20.1 billion. This acquisition makes it the largest international deal for a Japanese company. The newly created entity will be called "New Sprint" and become a publicly traded company.

Sprint Nextel (S) stock was up more than 2% in pre-market trading Monday morning. The stock has gained 14% since the proposed deal was first reported last Thursday. The $20.1 billion offer represents a 36% premium to the average share price of Sprint over the last two weeks. Sprint shareholders still need to approve the deal.

SoftBank will spend $8 billion to directly acquire Sprint stock and will buy an additional $12.1 billion of existing Sprint shares on the market. SoftBank's majority position in Sprint will allow it to enter the highly competitive wireless market where Sprint has lagged rivals Verizon (VZ) and AT&T (T). SoftBank founder and CEO Masayoshi Son addressed concerns at a press conference Monday in Toyko.

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"It could be safe if you do nothing, and our challenge in the U.S. is not going to be easy at all," Son said. "We must enter a new market, one with a different culture, and we must start again from zero after all we have built."

The Sprint Nextel acquisition will mean a combined 96 million customers for SoftBank worldwide. Sprint merged with Nextel in 2005 and ranks as the third biggest U.S. wireless carrier. Sprint CEO Dan Hesse will keep his board membership and become chief of New Sprint.

Business Insider's deputy editor Joe Weisenthal tells The Daily Ticker's Aaron Task that the SoftBank deal will not likely impact U.S. Sprint customers."You will have your same phone, your same plan," he says. SoftBank was interested in Sprint because of the lack of opportunities in Japan's domestic wireless market, Weisenthal notes.

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The Japanese population is aging and "there's not a lot of growth in Japan anymore," he says. Softbank "sees the demographics and the long-term macro story in the U.S. is more appealing."

Some investors are still questioning SoftBank's decision to acquire a majority stake in Sprint. The U.S. wireless carrier holds about $15 billion in debt and has lost money in the last 19 quarters. Analysts at Standard & Poor's say the deal "may undermine SoftBank's financial risk profile."

Shares of SoftBank have dropped more than 20% in Tokyo trading since the two companies began advanced talks.

SoftBank's acquisition of Sprint Nextel has not raised any red flags with regulators and Congress. Last week a report issued by the House intelligence committee warned U.S. companies from conducting business with two leading Chinese telcom manufacturers. The report concluded that Chinese firms Huawei and ZTE have ties to the Chinese government and could use their equipment to spy on U.S. consumers, businesses and the government.

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