Japanese mobile carrier Softbank has acquired 70 per cent of US wireless company Sprint for $20.1bn. 

This is the largest ever foreign acquisition by a Japanese company and as it brings together the third largest mobile carriers of both Japan and the US, combined revenue will rank it third among global operators.

Softbank will continue to focus on mobile network expansion and customer acquisition before the deal is finalised in mid-2013. But the company has warned that this will result in a short-term increase in cost.

The deal was announced at a joint news conference in Tokyo by Softbank President Masayoshi Son and Sprint Chief Executive Dan Hesse. The companies said that $12.1bn will be paid to Sprint shareholders and some of the $8bn of new capital will be used to strengthen Sprint’s balance sheet.  

The deal has been approved by the boards of both companies, but Sprint shareholders and US regulators must now seal the fate of the deal.

Mike Roberts, principal analyst at Informa Telecoms & Media, said of the acquisition: “This is an audacious deal that could transform or hobble the companies depending on how it plays out. For Softbank it is a huge bet that it’s better to invest $20 billion in the third-largest US mobile operator rather than its home market of Japan where it is the third-largest mobile operator behind NTT DoCoMo and KDDI. 

“Sprint is in the middle of implementing two huge bets that are costing billions – its network modernisation program and acquiring the iPhone – so this will be a third one on top of those, which will make it hard to pull off and risks diverting attention from its current projects.

“If Softbank and Sprint can pull this off it could transform Sprint into a company that has the scale and financial resources to compete head-to-head with Verizon Wireless and AT&T, which dominate the US mobile market with 33 per cent and 31 per cent market share, respectively, compared to Sprint with 17 per cent and T-Mobile with 10 per cent.”