After churning through the rumor mill for the past half-week, official word came Monday that Japanese telco SoftBank is making a significant investment in Sprint, the third-largest mobile carrier in the US. SoftBank is acquiring 70% of Sprint in exchange for approximately $20bn, of which $12bn will be distributed to shareholders in exchange for 55% of the existing company. The remaining $8bn will be used for network expansion, primarily related to deploying 4G LTE. Beyond those efforts, the new Sprint could look to use some of its newfound cash to expand via M&A.
In announcing the deal, Sprint noted that this investment comes at a prime time. The company is continuing to execute on a multiyear turnaround. After Dan Hesse took the helm in December 2007, he spent the next three years focused on reversing Sprint’s customer attrition and improving its beleaguered brand. (Of course, some of those difficulties stemmed from its acquisition of Nextel in 2004. However, regarding customer service, those issues have largely been resolved, as the table below shows.) SoftBank’s move comes during Sprint’s investment phase, where it is now focused on building out its network and improving operational efficiency.
Now, with a stronger balance sheet, we wonder if SoftBank-backed Sprint will look to M&A for accelerated expansion. SoftBank has already shown a willingness to consolidate telecom assets in its home Japanese market. Earlier this month, it announced that it would buy Japanese wholesale broadband provider eAccess for $1.84bn. And in 2006, it picked up Vodafone K.K., the Japanese mobile unit of Vodafone Group, for about $16bn.
Although Sprint has struggled with M&A in the past, it could be spurred to move once more, as there are only a finite amount of targets left in the US and one was recently removed from reach. Earlier this month, T-Mobile announced that it was acquiring MetroPCS, which had long been rumored as a Sprint acquisition target. After MetroPCS, the next most likely candidate for Sprint to buy is Leap Wireless, which, including its cash and debt, is valued at about $3.2bn.
Wireless service provider satisfaction rating by company – ranking of customers who say they are very satisfied with their current wireless provider
Source: ChangeWave Research
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