Japanese telecom giant Softbank Corp (USA) (OTCMKTS:SFTBF) finally won Sprint Nextel Corporation (NYSE:S) shareholders’ approval for its biggest overseas acquisition. The eight-month-long fight with regulators and DISH Network Corp (NASDAQ:DISH) came to an end on June 25 when 98% of Sprint’s shareholders cast their vote in favor of the sweetened bid in the special meeting.
The merging entities are now waiting for the go ahead signal from the Federal Communications Commission so that they can conclude the deal by early July. Once that is done, SoftBank aims to equip the third-largest U.S. carrier to effectively take on the industry leaders to become one of the top telecom operators. However, SoftBank’s journey to close Sprint’s deal wasn’t smooth. But, the determined telecom giant found ways to realize its dream of entering the U.S. wireless market. Let’s take a brief look at the deal specifics.
The road to success
The FCC is expected to clear Softbank Corp (USA) (OTCMKTS:SFTBF)’s merger proposal shortly so that the Japanese carrier can move as per its plan. DISH’s unsolicited counterbid of $25.5 billion pressurized SoftBank to raise its $20.1 billion bid to $21.6 billion. Sprint’s shareholders may either opt for $7.65 a share or get one common stock of the new merged entity for each share they own. The cash consideration of the revised deal comes to $16.64 billion.
Meanwhile, Sprint Nextel Corporation (NYSE:S) made an acquisition bid for Clearwire Corporation (NASDAQ:CLWR), which was again followed by DISH’s counter offer. Finally Sprint outpaced its rival’s offer of $4.40 a share and proposed $5 a share for the Bellevue-based carrier to win investors’ confidence. The telecom provider has also received commitments from strategic investors of Clearwire who own 9% of the company’s shares, that they would sell their ownership to Sprint even if the Sprint-Clearwire deal falls through. This is encouraging news for the telecom operator.
This being said, will Sprint actually be able to contend the duopoly of Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T)? That remains to be seen.
Gaining competitive strength
The merger is crucial for both Softbank Corp (USA) (OTCMKTS:SFTBF), which has ambitious goals and wants to explore the U.S. wireless industry, and Sprint, which is finding it difficult to compete with Verizon and AT&T. SoftBank’s expertise shall help Sprint cut costs and increase efficiency by reshaping the carrier’s dynamics. The combination would not only strengthen the Kansas-based carrier’s balance sheet, but it would also speed up the LTE network deployment process and attain the Network Vision. This would, in turn, help Sprint to expand its subscriber base in new markets.
This is exactly what Softbank Corp (USA) (OTCMKTS:SFTBF) and Sprint aim for. Despite being the third-largest national carrier, Sprint is way behind the two leaders and gives competition just for the sake of it. Expansion of the subscriber base would make the carrier edge closer to Verizon and AT&T. As per Bloomberg, the combined entity would be the world’s sixth-largest telecom company and the second-largest player providing mobile internet services.
The company’s Chief Executive, Dan Hesse, said, “The transaction with SoftBank should enhance Sprint’s long-term value and competitive position by creating a company with greater financial flexibility.”
While Sprint’s future looks set, what about DISH’s dream to enter the wireless industry?
