SoftBank's $12.1 Billion Stake in Sprint Creates Enormous War Chest

Smartphone-HTC-EVo-4GAfter weeks of rumors and less than subtle hints from Sprint itself, Asian superpower SoftBank has agreed to take a 70% stake in distant third U.S. carrier Sprint. The $12.1 billion stock buy, announced this morning, is on top of a massive $8 billion dollars in working capital for the company. Overall, the deal entails $20.1 billion in SoftBank investment. When the deal dust settles, SoftBank will own 70% of the newly capitalized company. Yeah, that is serious money.

SoftBank’s goal is as overt as the statement accompanying the deal. It plans to take aim at Verizon and AT&T as everyone moves to LTE 4G systems, at which the Japanese company excels. The company touts its “track record of success in taking share in mature markets from larger telecommunications competitors.” In fact, the deal creates a new brand called “New Sprint.”

SoftBank brings to Sprint much-needed help in catching up on the 4G front. Sprint has always had a strong portfolio of spectrum assets, but it is swimming in debt. Its 4G build out has been late and expensive. It committed to an enormous number of iPhones in another late attempt to ride that star, although it was already well established at AT&T and Verizon. The company extinguished a Nextel brand that had great credibility in some segments of the business market. And its main competitive message has been price in a market where T-Mobile and a range of prepaid carriers seemed to steal their thunder. The company needed this kind of game-changing deal to maintain relevance in the U.S. market.

SoftBank likes to make deals. As CNNMoney points out this morning, the company’s large Japanese presence comes in the wake of its deal for Vodafone, and it even has a piece of Zynga. And SoftBank itself has a good deal of debt it is already carrying, reports MoneyWatch. It is taking on two massive rivals in a country where it has limited experience. There is no easy path to increased market share here.

It may be hard to recall now, but at one time before the smartphone era, Sprint was one of the most open and vocal leaders in mobile marketing among the major carriers. It started one of the earliest on-deck ad products and had among the most robust early mobile content portals and video hubs on the first 3G phones. In many ways, however, the window of opportunity for carriers to become mobile media companies may have passed. The ecosystem of the smartphone effectively bypassed the carriers and radically reduced their former role in the mobile media and marketing worlds. Now they seem to be arguing over which one of them is the biggest, fastest, most reliable…dumb pipe.   

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