* Deal would give Softbank cheaper access to smartphones
* Deal could be at 27 percent premium - analyst
* Sprint, Clearwire soar in early trade, MetroPCS sinks
(Recasts with Sprint confirmation Of talks)
By Taro Fuse and Sinead Carew
TOKYO/NEW YORK, Oct 11 (Reuters) - Japanese mobile carrier Softbank Corp is in talks to buy a majority stake in U.S. operator Sprint Nextel Corp for more than 1 trillion yen ($12.8 billion), according to a source with direct knowledge of the matter, adding yet another potential shake-up to the fast-changing U.S. wireless market.
In response to reports of a pending deal, Sprint said on Thursday that it was in talks with Softbank on a "potential substantial investment" that could involve a change in control of the company. It said there was no assurance of a sale.
A deal would give Sprint a much-needed partner with deep pockets whose backing would lower the company's cost of capital, analysts said. On the other side, Softbank would get the entry point to the U.S. market it has sought for months, which could help it counter stagnating growth in Japan.
Sprint, whose market capitalization was $15.12 billion at Wednesday's market close, is the third-largest U.S. carrier, with more than 56 million users at the end of June. It is in the middle of a costly network upgrade that has led it to consider a range of partnerships.
Sprint shares surged nearly 19 percent to $5.99 in morning trading, touching their highest levels in 16 months. Sprint bonds also jumped on heavy volume, and the coast of protecting that debt against default plunged sharply as investors priced in the prospect that a backer could pull Sprint's debt up to an investment-grade level.
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Softbank is in talks with several banks to borrow money to finance a bid, a source familiar with the matter told Reuters. One analyst said Sprint might be the Japanese company's only option if it has eyes on the American market.
"In terms of (Sprint) standalone, we believe the asset represents the only way for a potential new entrant to get a national presence immediately in the U.S.," Wells Fargo analyst Jennifer Fritzsche wrote in a note to clients.
Meanwhile, Sprint has been considering whether to make a bid for smaller rival MetroPCS Communications , which this month agreed to merge with Deutsche Telekom's T-Mobile USA, a source told Reuters this week.
It was unclear what effect, if any, a Softbank deal might have on Sprint's potential pursuit of MetroPCS, whose shares fell 4.9 percent to $11.45 in morning trading.
(Additional reporting by Mari Saito and James Topham, with Sruthi Ramakrishnan in Bangalore; Writing by Ian Geoghegan and Ben Berkowitz; Editing by Ron Popeski, Bernadette Baum and John Wallace)
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