Year in review 2012: Sprint gets a $20.1B lifeline from Softbank


The news: Less than two weeks after T-Mobile USA announced plans to merge with MetroPCS (NYSE:PCS), Japanese operator Softbank said it would purchase 70 percent of Sprint Nextel (NYSE:S) in a deal valued at $20.1 billion. The mammoth and complex transaction promises to revitalize Sprint into a company ready to take the fight to Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T).

Under the terms of the deal, which the carriers expect to close by mid-2013, Softbank will pay $12.1 billion directly to Sprint shareholders and will pay another $8 billion for new equity in Sprint. Sprint said the deal will help improve its scale and create new opportunities to collaborate on consumer services and applications. Softbank CEO Masayoshi Son, an iconoclast tycoon, came to the United States to woo Sprint investors shortly after the deal was announced--he said the deal would allow Sprint to be aggressive, improve its data speeds and obtain the "war funds" to go to battle with Verizon and AT&T.

Indeed, just a few weeks after Softbank's announcement, Sprint announced plans to purchase Clearwire (NASDAQ:CLWR) in a $2.2 billion deal. Like many deals in 2012, this one was about spectrum. Clearwire commands around 160 MHz of spectrum in the top 100 markets, and Sprint said its Network Vision network architecture would allow it to efficiently deploy TD-LTE, which Clearwire had planned to do on its own. 

Why it was significant: The Softbank deal remade Sprint overnight into a carrier that was on much better financial footing than it was before. As a reflection of that change, Sprint said that after the deal closes it will officially drop "Nextel" from its corporate name. The deal bolsters Sprint's balance sheet and gives it the financial firepower to go after Clearwire, which may have been Softbank's plan all along. The spectrum from Clearwire and the added funds from Softbank mean that Sprint will be able to comfortably continue to offer unlimited data service for the foreseeable future, a key point of differentiation with Verizon and AT&T.

The value of the addition of Clearwire's spectrum to Sprint's portfolio cannot be understated: It may make Sprint the largest holder of spectrum in the United States. 

Of course, it's unclear exactly what moves Sprint will make if it does manage to close both Softbank's acquisition and its purchase of Clearwire. Further, there remain a wide range of issues that Sprint will have to deal with in 2013 and beyond, including obtaining devices for its various spectrum bands and potentially bidding in the FCC's H Block spectrum auction next year. Nonetheless, Sprint is clearly in a better position heading into 2013 than it was heading into 2012, and Hesse and Son could well further shake up the market as 2013 progresses.