Sprint Surprises With Takeover Talks
Oh what a difference a week makes. It seems like just yesterday I told investors to "Forget MetroPCS, Just Buy Sprint" and today, shares of Sprint Nextel are up 15% on the news that the company is in advanced talks with Japan's Softbank to possibly have that company take a majority stake in Sprint. The news is also floating shares of Clearwire, which is seeing a 35% gain, on the hopes that Sprint may use its potential influx of cash to buy the portions of Clearwire it doesn't already own, which would give Softbank the wireless spectrum it needs to turn Sprint into a major contender to both AT&T and Verizon.
If Softbank does follow through and acquire a majority stake in Sprint, it would be the largest stake a Japanese company has even taken in an American enterprise, which is especially surprising given how strong the Yen has been against the U.S. Dollar as of late.
Today's news is a major reversal for Sprint shares, which fell over 12% last week after T-Mobile announced that it was in talks to acquire MetroPCS, the same company Sprint tried to acquire a year earlier. The bear case for Sprint was that without PCS, Sprint would not have the spectrum it needed to wage an effective assault on the duopoly of AT&T and Verizon.
I countered that argument by saying that Sprint would indeed be fine without PCS and had plenty of options to go it alone. I said that Sprint had an excellent management team and was well on its way to becoming a viable third choice in the U.S. market. I must admit that I didn't see a deal with Softbank coming, but the combination certainly makes sense, especially if there's also a play for Clearwire in the mix. A combined Sprint Clearwire with money to spare from Softbank would indeed make Sprint, with its true unlimited data plans, a real threat to the big boys.
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