Sprint Nextel Corporation announced early Monday that they have ‘entered into a series of definitive agreements’ with Softbank Corp. effectively giving up 70% of the company to the Japanese owned firm. After the deal is approved, SoftBank will own approximately 70% and Sprint equity holders will own approximately 30% of the shares of company named New Sprint.
“This transaction provides an excellent opportunity for SoftBank to leverage its expertise in smartphones and next-generation high speed networks, including LTE, to drive the mobile internet revolution in one of the world’s largest markets,” said SoftBank Chairman and CEO, Masayoshi Son. “As we have proven in Japan, we have achieved a v-shaped earnings recovery in the acquired mobile business and grown dramatically by introducing differentiated products to an incumbent-led market. Our track record of innovation, combined with Sprint’s strong brand and local leadership, provides a constructive beginning toward creating a more competitive American wireless market.”
SoftBank will form a new U.S. subsidiary, New Sprint, and invest $3.1 billion. After the deal closes SoftBank will add an additional $17 billion into New Sprint. New Sprint will become a publicly-traded company and Sprint will become its wholly-owned subsidiary.
“This is a transformative transaction for Sprint that creates immediate value for our stockholders, while providing an opportunity to participate in the future growth of a stronger, better capitalized Sprint going forward,” said Sprint CEO, Dan Hesse. “Our management team is excited to work with SoftBank to learn from their successful deployment of LTE in Japan as we build out our advanced LTE network, improve the customer experience and continue the turnaround of our operations.”
SoftBank was established in 1983 by its current Chairman & CEO Masayoshi Son and has based its business growth on the Internet. It is currently engaged in various businesses in the information industry, including mobile communications, broadband services, fixed-line telecommunications, and portal services. In terms of consolidated results for fiscal 2011, net sales increased 6.6% year on year to ¥3.2 trillion, operating income increased 7.3% to ¥675.2 billion, and net income rose 65.4% to ¥313.7 billion.
While it appears the new company will be stronger in the American market, what will it mean for the sport of NASCAR?
Probably not much.
This marks the second time that the sponsor of NASCAR’s top touring series has been sold. In 2005 Nextel, which had assumed sponsorship of NASCAR’s top series from Winston, was purchased by Sprint. Sprint took over the 10 year sponsorship and renamed the series the Sprint Cup Series in 2008. That original deal was set to expire in 2013, but last year Sprint announced an extension.
After the financial dust settles it’s hoped that consumers will see little change, Sprint will just be a stronger company. New Sprint will have a 10-member board of directors, including at least three members of Sprint’s board of directors. Hesse will continue as CEO of New Sprint and as a board member. The fact that Sprint’s headquarters will continue to be in Overland Park, Kansas and that the biggest change will be New Sprint and have a new board of directors, seems to indicate that very little will change at the consumer level.
As for the NASCAR sponsorship as long as it continues to increase brand awareness of Sprint, or New Sprint, the sponsorship should continue. NASCAR is the biggest auto racing sport in America and continues to be a very valuable business. If Sprint, or New Sprint, decides to bail it shouldn’t be long before a new company will be ready to step in. Either way, cars will still be racing, fans will still be cheering and NASCAR will continue for years to come.
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