UPDATED: Sprint will play a $20.1B role in Softbank's LTE vision

Japan's Softbank is making a a $20.1 billion gamble in a wide-reaching effort to become an LTE powerhouse in the United States as well as its home county of Japan. The LTE ecosystem, in particular the TD-LTE ecosystem, could get a major boost via a deal announced today between Japan's Softbank and Sprint Nextel (NYSE:S) under which Softbank will pay $20.1 billion for a 70 percent stake in the U.S. company. 

The Softbank deal became official early Monday morning. Softbank will pay $12.1 billion directly to Sprint shareholders and will pay another $8 billion for new equity in Sprint at $5.25 per share. Under the terms of the deal, around 55 percent of current Sprint shares will be exchanged for $7.30 per share in cash, and the remaining shares will be converted into shares of a new publicly traded entity, New Sprint. After the deal closes Softbank will own around 70 percent and Sprint shareholders will own 30 percent. The companies said they expect the deal to close in mid-2013.

Early reports had speculated that the deal would ultimately result in Sprint acquiring the 52 percent of Clearwire (NASDAQ:CLWR) that it does not already own. However, that was not part of the Monday announcement. Many analysts have speculated thatSoftbank's interest in Sprint is driven in part by Sprint's stake in Clearwire, whose TD-LTE ambitions match Softbank's own. Softbank and Clearwire are both part of the Global TD-LTE Initiative that was formed in February 2011.

In February, Softbank launched Softbank 4G, a mobile broadband network based on AXGP (Advanced eXtended Global Platform), a derivative of the old Willcom PHS (Personal Handyphone Service) network that has commonalities with TD-LTE. The network uses the 2.5 GHz spectrum band, the same band Clearwire will use. In April, Softbank announced it would also launch FDD-LTE networks built by Nokia Siemens Networks and Ericsson (NASDAQ:ERIC) this fall.

Sprint has said its FDD LTE devices will be able to run on its FDD-LTE network as well as Clearwire's TD-LTE network, and Sprint will offload excess traffic onto Clearwire's network.

Softbank is on a buying spree of late. Earlier this month, Japan's third-largest mobile operator also moved to acquire eAccess, the country's fourth largest operator, for $2.3 billion, or 180 billion yen. That acquisition will make Softbank Japan's second-largest operator behind NTT DoCoMo. The deal will consolidate network operations and customers and bring Softbank additional spectrum as well as more LTE assets given that eAccess is launching an LTE network using 1800 MHz spectrum.

Softbank intends to reconfigure eAccess' 1700 MHz network into a DCS (1800 MHz, band class 3) LTE network, which would support the iPhone 5 as well as nearly all LTE devices sold in Europe and mainland Asia. said ExtremeTech, citing Matsuhiro Kurano of SoftBank Group Public Relations.

SoftBank will then be able to offer support for HSPA+ devices that work on 900 MHz (band VIII) and 2100 MHz (band I), plus FDD LTE devices that work on 1800 MHz (band class 3) and 2100 MHz (band class 1). Separately, SoftBank will soon also be able to offer support for TD-LTE devices on 2.5 GHz (band class 41, the same band that Clearwire will use), said ExtremeTech.

Softbank is known in Japan for being a price leader and conducting creative marketing campaigns. "Softbank is likely to drop prices, as it has in the past" if a deal goes through, Hideyuki Yokoya, a mobile analyst at MM Research Institute in Tokyo, told Computerworld.

Among other things, the operator has used talking cats to explain its pricing and has a long-running ad campaign that features a human family led by a father who is a gruff white dog. Softbank even introduced a phone with a built-in radiation detector following Japan's devastating tsunami and nuclear crisis.

Despite the strong yen, Softbank Mobile's service prices in Japan are lower than those at Sprint. A 16GB iPhone 5 on an unlimited-data, two-year contract costs a total of about $2,200 over the length of the contract at Sprint, compared to about $2,000 at Softbank, though voice prices vary, said Computerworld.

Japanese consumers have benefitted from Softbank's aggressive pricing as its main rivals, NTT DoCoMo and KDDI, generally match its price packages.

Yokoya said Softbank's long experience with near field communication (NFC), a standard technology in Japan, could benefit Sprint as U.S. consumers gain familiarity with NFC.

While all of the drama around the Softbank investment plays out, Sprint has been busy rolling out its FDD LTE network. The operator just announced it is building out LTE in 20 new cities, the largest of which is San Francisco,

Sprint said that during the pre-launch phase, its customers with LTE-capable devices may begin to see LTE coverage in these areas and are welcome to use the network even before it officially launches. "We're committed to providing improved 3G and 4G LTE as quickly as possible, and keeping our customers informed as to when and where they can experience the new network's superior performance and speed," said Bob Azzi, the operator's senior vice president-network.

Crtitics have accused the operator of announcing official LTE launches in certain cities before there is sufficient coverage. Sprint's LTE coverage is ultimately expected to match its existing nationwide 3G footprint.

Sprint's LTE rollout is part of its Network Vision project, which also entails improving its CDMA infrastructure to better service. The company said it has completed significant enhancements in Baltimore, Boston, Chicago, Los Angeles, New York City and Washington, D.C.

For more:
- see this Sprint release
- see this CNBC article
- see this ExtremeTech article
- see this Computerworld article
- see this separate Sprint release

Special Report: Softbank to take control of Sprint: Complete coverage

Related articles:
Report: Softbank to buy 70% of Sprint
Analysis: A Softbank buyout would give Sprint cash, improve TD-LTE ecosystem
Can Japan's Softbank reinvigorate Sprint?
Sprint confirms Softbank in talks to take control
Softbank adding FDD-LTE to its 3G and TD-LTE arsenal
Japan's Softbank to build TD-LTE compatible network

Article updated Oct. 15 to confirm Softbank's purchase of 70% of Sprint.  Also, article was updated Oct. 14, 2012, to reflect the value of Softbank's planned acquisition of eAccess.

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