SOURCE: Five Star Equities

Five Star Equities

October 17, 2012 08:20 ET

Clearwire Shares Surge as Softbank Agrees to Purchase 70 Percent Stake in SprintNextel

Five Star Equities Provides Stock Research on Sprint Nextel and Clearwire

NEW YORK, NY--(Marketwire - Oct 17, 2012) - Japan's third-largest mobile carrier Softbank Corp. on Monday agreed to purchase a 70 percent stake in SprintNextel Corp. for approximately $20 billion. The deal will provide Sprint with a much needed influx of cash and enable them to become a major competitor to industry leaders AT&T and Verizon. Five Star Equities examines the outlook for companies in the Domestic Telecom Industry and provides equity research on Sprint Nextel Corporation (NYSE: S) and Clearwire Corporation (NASDAQ: CLWR).

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Once the purchase is complete, by mid-2013, Softbank will become one of the world's largest telecom groups with roughly 90 million subscribers. The merger was the second announced this month as Deutsche Telekom AG owned T-mobile USA agreed to merge with MetroPCS. Analysts have speculated that Clearwire Corp. may be next in line.

"This is pro-competitive and pro-consumer in the U.S. because it creates a stronger No. 3... it competes with the duopoly of AT&T and Verizon. When you look at what Softbank has accomplished in Japan with the No. 3 carrier, it's something we can learn from," said Sprint Chief Executive Dan Hesse.

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Softbank will purchase $8 billion of shares directly from Sprint, and another $12.1 billion worth of shares on the open market. "The deal obviously creates a healthier balance sheet for Sprint, allowing the company to examine M&A opportunities, accelerate its 4G network builds, and help fund its iPhone subsidy contract with Apple," Stifel Nicolaus analyst Christopher King writes in a research note.

Shares of Clearwire, which is 48 percent owned by Sprint, have more than doubled in the last week as news regarding the possible merger began to spread. "Funding has been a problem for Clearwire and this is a perfect fit for Softbank's larger corporate strategy," wrote Analysys Mason analysts Chris Nicoll and Steve Hilton.

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