Sprint, Japanese Company Agree to $20 Billion Deal
OVERLAND PARK, Ks. — The metro area’s largest private employer is getting billions in cash, as a Japanese firm strikes a deal to buy a controlling interest in Sprint.
The wireless provider says it will sell 70 percent of the company to Japan’s fast-growing wireless carrier, Softbank. If approved by shareholders and regulators, the deal is worth more than $20-billion.
“Today is a good news day,” said Bill White, a Sprint executive vice president. “It’s a good news day for Sprint. A good news day for Kansas City. And a good news day for consumers nationwide.”
Sprint has been operating in recent years with about $21 billion in debt. This transaction gives the company $8 billion in cash to better compete with Verizon and AT&T. And it keeps Sprint employees working in a headquarters that’s expected to remain in Overland Park.
Leaders at Sprint and outside observers agree that cash in the driving factor in this deal. Sprint needs more money to service its debt and keep up with changing wireless technologies. And Softbank of Japan has plenty of cash and a desire to expand into the American market. Buying a majority of Sprint will make Softbank the third largest wireless operator in the world.
“You need money, that’s the name of the game. It’s all about cash,” said Prof. Anthony Tocco, of the Helzberg School of Management at Rockhurst University. “What they are going to be doing is using the expertise of the Japanese company plus Sprint’s network plus the Japanese cash and that’s a really good combination and partnership. Everybody is going to be a winner.”
Sprint gets $8-billion in cash as part of the deal. Softbank’s investment is expected to help Sprint catch up to AT&T and Verizon in high-speed long-term evolution (LTE) data service and provide Sprint greater buying power on the newest technology and equipment.
“We will use those proceeds in whatever ways we think we maximize shareholder value,” said Sprint CEO Dan Hesse. “It could be internal investments, external investments. It could possibly be to retire debt and reduce our interest expenses. There are a variety of ways that it could be put to use.”
Softbank has no employees in the United States, and White says that virtually guarantees that the jobs of Sprint workers here are safe. And as Sprint becomes a more formidable competitor company leaders says their goal is to create even more jobs in the metro area.
“A strong Sprint is great for Kansas City because it means jobs,” White said. “Not just at Sprint. It means jobs for other companies that start up. Also service companies that provide services to Sprint. So a healthy Sprint means a healthy Kansas City.”
Unlike Sprint’s merger with Nextel where the two networks were incompatible, both Sprint and Softbank use similar technology for their LTES high-speed data networks. The deal is expected to be completed by the middle of next year.
Sprint expects U.S. regulators to approve it because it stregthens competition in the American marketplace.