Sprint Nextel Corp. is dropping the Nextel part of its name as it completes a deal with Tokyo-based SoftBank Corp. that gives the Japanese company majority ownership of the third-largest U.S. wireless carrier.
The company will retain its ticker symbol “S” on the New York Stock Exchange and go by the simplified name Sprint Corp., according to a statement yesterday. SoftBank is spending $21.6 billion, including a cash infusion of $5 billion, to acquire control of the carrier.
The name change turns the page on an ugly chapter for the U.S. company, which spent $36 billion on Nextel Communications Inc. only to write off most of the purchase price after struggling to integrate the two companies’ networks. For billionaire SoftBank founder Masayoshi Son, whose company has stakes in Ustream Inc. and Gilt Groupe Inc. in the U.S., the acquisition will help fulfill his ambition of making the company the world’s biggest mobile phone operator.
“This spurs expectations for further growth, even though there’s some risk,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Holdings Inc. in Tokyo. “Son also wants to earn from content on the Internet in the U.S.”
Sprint Chief Executive Officer Dan Hesse will remain at the helm of the newly minted company. Son, 55, will serve as chairman, while SoftBank board member Ronald Fisher will be vice chairman. Sprint shut down the Nextel system this year.
SoftBank shares fell 0.7 percent to 5,720 yen at the close of trade in Tokyo. Sprint rose 1.7 percent to $7.18 in New York.
SoftBank, the third-largest Japanese carrier, won a bidding war for Sprint when it raised its takeover bid and Dish Network Corp. abandoned a competing proposal. SoftBank plans capital spending for Sprint of $8 billion this year and in 2014 before dropping to $6 billion annually for the four years after that. Annual savings at Sprint will be about $2 billion in the first four years from cost cutting, Son said last month.
The Japanese carrier had its credit rating cut to A- from A by Japan Credit Rating Agency today. The acquisition of Sprint will result in a substantial increase in SoftBank’s debt and deterioration is “inevitable,” the ratings company said in a statement.
Standard & Poor’s cut SoftBank to BB+, the highest non-investment grade, last week.
Sprint separately completed the acquisition of Clearwire Corp, a mobile broadband company it already majority owned, it said July 9. SoftBank needs Clearwire’s wireless airwaves to roll out a fourth-generation network in the U.S. to challenge Verizon Wireless and AT&T Inc.
Englewood, Colorado-based Dish, controlled by billionaire Charlie Ergen, abandoned its offer for Clearwire, conceding a bidding war with Sprint on June 26. Dish’s decision to move away from Clearwire came days after it scrapped its $25.5 billion proposal for Sprint.
SoftBank, which has about 42 million subscribers with its units, is the fastest-growing mobile carrier in Japan. It ranks behind NTT DoCoMo Inc. and KDDI Corp. in Japanese sales.