Updated: Sprint confirms Softbank in talks to take control

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Japanese operator Softbank is considering taking a majority stake in Sprint Nextel (NYSE:S), Sprint confirmed. The deal could be valued at around $12.8 billion, according to multiple reports.

The reports, in the Wall Street Journal, Bloomberg and Reuters, all cited unnamed sources and said Softbank is looking to purchase at least a two-thirds stake in Sprint. According to the Journal and Reuters, the deal is valued at $12.8 billion, but Bloomberg said the price tag could be as high as $19 billion.

"Sprint today confirmed that it is currently engaged in discussions with Softbank regarding a potential substantial investment by Softbank in Sprint," Sprint said in a statement. "Although there can be no assurances that these discussions will result in any transaction or on what terms any transaction may occur, such a transaction could involve a change of control of Sprint. Sprint does not intend to comment further unless and until an agreement is reached."

It is unclear how far along the talks are. The Journal said the talks are "advanced" but said it was not clear whether they would result in a deal. Should the deal be finalized it would once again reshape the U.S. wireless industry, which is currently in flux. Earlier this month, Deutsche Telekom's T-Mobile USA agreed to acquire flat-rate player MetroPCS (NYSE:PCS).

Softbank's motivation behind such an agreement would be to gain greater economies of scale in purchasing equipment and handsets. Softbank also uses TD-LTE technology in the 2.5 GHz band, which is what Sprint partner Clearwire (NASDAQ:CLWR) will use for its LTE network.

Softbank agreed this month to purchase Japanese carrier eAccess for $1.84 billion. The acquisition brings Softbank's subscriber count to 39 million customers and makes it larger than KDDI, which has 36 million subscribers. Softbank also acquired Vodafone Japan in 2006 to increase its scale. Sprint has 56.4 million customers.

Sprint, meanwhile, is in the midst of a turnaround, based on its Network Vision network modernization plan and its deal to sell Apple's (NASDAQ:AAPL) iPhone. On Wednesday at an investor conference Sprint CFO Joe Euteneuer reiterated recent comments from CEO Dan Hesse that the company could produce a profit in 2014 as it expands its margins. 

Analysys Mason analyst Steve Hilton said noted that both Sprint place strong emphasis on customer satisfaction and service, which would make them mesh well. He also said that if such a deal were to take place there is the prospect that Japanese mobile culture will permeate the U.S. market. "The idea that U.S. consumers would have better access to the latest Japanese consumer electronics makes the techie in me salivate," he said. "Miniaturization, unique form factors, odd-ball design--how great would it be to get a proliferation of Japanese-inspired products into the U.S.?"

There has been speculation that Sprint might make a counterbid for MetroPCS. According to a separate Bloomberg report, which also cited unnamed sources, Sprint's board is holding off on making an offer while it looks more closely at DT's bid to swallow MetroPCS. Sprint's board wants to see DT's proxy filing on the deal to determine how it was negotiated, the report said.

For more:
- see this Sprint release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this separate Bloomberg article
- see this separate WSJ article (sub. req.)

Related Articles:
T-Mobile's Ray: Network issues complicate potential Sprint/MetroPCS deal
Sprint bid for MetroPCS faces range of complications
Sprint, Leap left on the outside of T-Mobile/MetroPCS deal
Deutsche Telekom's T-Mobile USA to merge with MetroPCS

Article updated Oct. 11 with confirmation from Sprint.