Last week's discussions apparently paid off and Sprint has announced that SoftBank will purchase 70% of Sprint for a total of $20.1 billion. This purchase now values Sprint at $28.7 billion, far below AT&T's offer of $39 billion for T-Mobile, the next smaller network. $12.1 billion of the total will be distributed to stockholders, while the remaining $8 billion will go directly into the new company to help capitalize expenses. The new corporation will be known as New Sprint.
There has been a lot of concern over Sprint's financial health, driven primarily by the amount of cash they have sunk into their failing WiMax partner Clearwire. This $8 billion in cash could help them finally buy Clearwire out of the partnership, as well as help finance their own LTE expansion. This could be accomplished through standard network expansion or through a buyout of MetroPCS.
Clearly SoftBank is thinking LTE when it comes to this merger. Hit the break to see what their CEO has to say about the future of Sprint.
SoftBank CEO, Masayoshi Son, said,
This transaction provides an excellent opportunity for SoftBank to leverage its expertise in smartphones and next-generation high speed networks, including LTE, to drive the mobile internet revolution in one of the world's largest markets. As we have proven in Japan, we have achieved a v-shaped earnings recovery in the acquired mobile business and grown dramatically by introducing differentiated products to an incumbent-led market. Our track record of innovation, combined with Sprint's strong brand and local leadership, provides a constructive beginning toward creating a more competitive American wireless market.
Dan Hesse, CEO of Sprint and the CEO of New Sprint, said,
This is a transformative transaction for Sprint that creates immediate value for our stockholders, while providing an opportunity to participate in the future growth of a stronger, better capitalized Sprint going forward. Our management team is excited to work with SoftBank to learn from their successful deployment of LTE in Japan as we build out our advanced LTE network, improve the customer experience and continue the turnaround of our operations.
So, Sprint will use Softbak's experience to enhance the company's existing smartphone market and to expand their focus on LTE roll-out. Both companies seem to have the same focus on LTE as the future of communications, including for Sprint. It will be interesting to see if the new management will retain the pin-drop logo or if we will see a new logo come out of New Sprint. This is an exciting and crazy time for the wireless industry.