Japan's Softbank head says $20b Sprint deal a risk

The head of Japan's Softbank admitted the firm was taking a risk after it confirmed Monday it would pay $20 billion to take over US-based Sprint Nextel in Japan Inc's biggest overseas acquisition.
Softbank said the ambitious deal would see it acquire 70 percent of Sprint Nextel, the third-biggest US mobile firm behind AT&T and Verizon Wireless, by the middle of next year.
Chief executive Masayoshi Son, a well-known tech entrepreneur and Japan's second-richest man, acknowledged his firm was jumping into the US mobile market where it has no foothold or experience, and taking over a heavily indebted firm that lost $2.89 billion last year.
"This will be a big challenge -- when you take on a big challenge, it comes with big risks," he told a news conference in Tokyo on Monday. "However, maybe avoiding the challenge is a larger risk."
"A man must not settle for being number two -- you must aspire to be number one," he added.
The combined company will have about 90 million subscribers.
Son's comments underlined fears aired by analysts and investors over the cross-ocean marriage, which catapults Softbank to third spot globally among cellular firms after China Mobile and Verizon.
Softbank shares fell 5.30 percent to 2,268 yen in Tokyo trade ahead of the announcement Monday, after tumbling 17 percent Friday when it confirmed it was in talks with Sprint.
And on Monday Moody's put the firm under review for a possible downgrade, following a decision by fellow agency Standard & Poor's to put it on review Friday, saying it would heap pressure on an already debt-heavy balance sheet.
"While the transaction may benefit the combined companies as a result of lower capital expenditures and such items as the cost of handsets, we believe the addition of new debt is unlikely to offset the initial benefits of the transaction," Moody's said in a statement.
In 2006, Softbank bought the struggling Japanese arm of Vodafone for about 1.75 trillion yen ($22.2 billion at current exchange rates), while it has announced plans to buy smaller rival eAccess Ltd for $2.3 billion.
"This will be the largest investment by a Japanese firm in an American firm," Son told the Tokyo briefing.
"You might ask whether this will succeed. I am confident."
The deal -- which will see Softbank buy $12 billion worth of Sprint shares on the market and $8 billion in newly issued stock -- will be financed with cash and loans from Japan's major lenders and Deutsche Bank, the carrier said.