Sprint Nextel said Thursday that it is considering selling a majority stake to Japan’s SoftBank, the latest deal among industry underdogs who are scrambling to catch up to the leads of giants Verizon Wireless and AT&T.
The Overland Park, Kan., company declined to provide details about the potential deal, but analysts who follow Sprint, the nation’s third-largest wireless carrier, said it would probably receive about $13 billion for selling a 75 percent stake to SoftBank.
That would give Sprint, which has struggled to find its footing, some much-needed financial firepower to buy other companies. News of the deal sent Sprint’s stock up more than 14 percent in regular trading. In a statement, the company said it was involved in a deal that “could involve a change of control of Sprint.”
One potential acqusition target is Clearwire, a high-speed wireless carrier that owns a swath of airwaves in the United States. Sprint already owns a large chunk of Clearwire and may end up buying it outright as a result of the deal, analysts said.
Clearwire and SoftBank, a major telecommunications company in Japan, are both building out high-speed networks called 4G that use similar technology. If put under the same roof, the two companies could have an easier time striking deals with best handset makers.
Clearwire’s stock rose nearly 71 percent Thursday.
“Adding SoftBank into the equation opens up a number of possibilities for Sprint, including taking over Clearwire and perhaps making other wireless acquisitions down the road to improve its standing in the evolving 4G market relative to Verizon and AT&T in particular,” said Jeff Silva, a senior analyst at Medley Global Advisors.
A deal would face regulatory approval by the Justice Department and Federal Communications Commission. The companies would also have to apply for approval from the Treasury’s Committee on Foreign Investment in the United States. Analysts say they expect the deal would be approved given the Obama administration’s push for more competition in the telecommunications sector.
Sprint’s woes have grown as Verizon Wireless and AT&T have increased their dominance. Those companies control about six out of 10 mobile-device contracts.
Sprint has also been saddled with massive debt. Some of it was carried over from its disastrous $36 billion purchase of Nextel in 2004. After the merger, the companies never managed to marry their two technologies.
Sprint, with 56 million customers, has also worked to rebuild its reputation after years of being known for bad customer service. It brought in chief executive Dan Hesse in 2007 and began cutting off unprofitable business, including its landline phone service and Nextel’s two-way walkie-talkie technology. It’s also paid off $4.75 billion of its $7.5 billion in debt.
But Hesse struggled to add customers at the same pace as AT&T and Verizon, even though Sprint is the only national carrier offering unlimited calling and data plans.
Sprint was also initially left out of the smartphone revolution brought about by Apple’s iPhone. That device first went to AT&T exclusively and then to Verizon. Sprint only began to sell the iPhone on its network last year and has had to pay Apple a heavy subsidy.
SoftBank, some analysts say, could pull Sprint out of its financial morass and help the company begin building out a stronger 4G network, analysts say.
“Our concern on Sprint from the beginning has been that they have insufficient capital to complete a credible network build,” said Craig Moffett, an analyst at Bernstein Research.
Analysts were hardly surprised that Sprint is seeking a white-knight backer. This month, T-Mobile and MetroPCS agreed to combine forces, saying they would focus on the frugal-minded, a customer base Sprint is also pursuing.