UPDATE 10-Sprint in talks on potential sale to Japan's Softbank


* Could be largest Japanese acquisition in U.S. ever

* Nikkei says Softbank would also pursue MetroPCS

* Deal could lead to Sprint buying Clearwire - analysts

* Sprint, Clearwire soar in afternoon trade; MetroPCS down

(Adds government review; updates to close)

By Taro Fuse and Sinead Carew

TOKYO/NEW YORK, Oct 11 (Reuters) - Japanese wireless serviceprovider Softbank Corp is looking to buy roughly 70percent of Sprint Nextel Corp in a bold move that wouldmake it a major player in the U.S. mobile market.

But Softbank's ambitions may not stop with Sprint, whichmight also be looking to buy out its partner, Clearwire Corp. The Japanese company might also be aiming to useSprint as a vehicle to make a run at smaller Sprint peerMetroPCS Communications Inc , a two-step transaction thatwould potentially cost more than 2 trillion yen ($25.55billion), according to a Nikkei report.

That would make it the biggest overseas acquisition by aJapanese company ever and vault Softbank into the upper echelonsof wireless carriers worldwide.

In response to reports of a pending deal, Sprint said onThursday that it was in talks with Softbank on a "potentialsubstantial investment" that could involve a change in controlof the U.S. company. It said there was no assurance of a sale.

Softbank is eyeing a controlling stake in Sprint worth morethan 1 trillion yen ($12.8 billion) and is in talks with severalbanks to borrow money to finance a bid, according to a sourcewith direct knowledge of the matter.

A second source familiar with the situation, who would notspeak on the matter publicly, said Softbank was after a stake ofroughly 70 percent, which it could achieve by buying some newlyissued shares directly from Sprint and tendering for the rest.

By raising some new equity directly, Sprint would be able toshore up its balance sheet and potentially fund other deals suchas a buyout of Clearwire in which it already holds roughly 48percent.

Sprint shares rose as much as 19 percent on Thursday tolevels not seen since the summer of 2011, on the heaviesttrading volume in the stock's history. The stock ultimatelyclosed 14.3 percent higher at $5.76 on New York Stock Exchange.

The shares of Clearwire, which could play a key role in anydeal, closed almost 71 percent higher at $2.22. Clearwire, whichhas been looking for new sources of funding, has said that ithas enough money until at least the middle of 2013.

It declined to comment on Thursday and its chief financialofficer pulled out of a conference presentation at the lastminute without an explanation.

A major Sprint investor said any Softbank investment shouldbe used to buy out the rest of Clearwire, to give Sprintattractive wireless spectrum assets and to speed up Clearwire'supgrade of its wireless network with faster data speeds.

"I just don't think there's any deal unless it involvesClearwire. I don't think you'd see one without the other," saidDaniel Martino, a fund manager at T. Rowe Price, which owned47.2 million Sprint shares as of the end of June.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Reuters video: Softbank in stake talks Sprint confirms More video Breakingviews: Softbank catches Japanese M&A bug Video: Adventurism ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> DEALS MULTIPLYING

Sprint, whose market capitalization was $15.12 billion atWednesday's market close, is the third-largest U.S. carrier,with more than 56 million users at the end of June, even afterlosing customers for years.

As for Softbank, Sprint might be its only option for anentrance into the U.S. market, according to analysts.

"In terms of (Sprint) standalone, we believe the assetrepresents the only way for a potential new entrant to get anational presence immediately in the U.S.," Wells Fargo analystJennifer Fritzsche wrote in a note to clients.

The Softbank news comes just days after a source toldReuters that Sprint has been considering bidding for MetroPCS,which agreed this month to merge with Deutsche Telekom AG's

T-Mobile USA.

MetroPCS shares fell sharply at the open, turned positive inbut then fell again, ending down 3.3 percent at $11.64.

The atmosphere was calm at Sprint headquarters in OverlandPark, Kansas on Thursday, all of the chatter aside.

"This will be interesting to see if it happens; if it haslegs," said one longtime Sprint manager who did not want to benamed. "There are always a bunch of rumours. Something like thisis always a possibility when your stock price is so low."


A third source familiar with the situation, who declined tospeak publicly about the matter, said Softbank has beenexploring ways to get into the U.S. market since this summer, asit sees opportunities for growth here that would help offset astagnating market in Japan.

Founded and led by Masayoshi Son - Japan's second-richestman, according to Forbes - Softbank has grown from a packagedsoftware distributor 30 years ago into a broadtelecommunications group worth more than $40 billion.

"He's the definition of patient capital," Martino of T. RowePrice said.

But it faces tougher competition at home against the likesof KDDI Corp and NTT Docomo .

Japanese media said buying Sprint - which competes in theUnited States against Verizon Wireless and AT&TInc - would also make it cheaper for Softbank to procuresmartphones and other mobile devices.

Benjamin Powell, a former general counsel to the director ofnational intelligence now in private practice at WilmerHale,said the deal was very likely to require a government reviewbecause it involved sensitive telecommunications networks. Butseveral analysts said regulators were likely to eventually lookfavourably on a deal.

Japanese companies made a record 642 cross-border deals lastyear, according to Thomson Reuters data. Buoyed by a strongeryen , the value of all overseas deals rose to $69.5billion, up 81 percent from 2010, also a record.

(Additional reporting by Mari Saito and James Topham in Japan,Sruthi Ramakrishnan in Bangalore, Soyoung Kim and MartinneGeller in New York, Rachelle Younglai in Washington and CareyGillam in Overland Park, Kansas; Writing by Ian Geoghegan andBen Berkowitz; Editing by Bernadette Baum, Andre Grenon and JohnWallace)




@BerkowitzRtrs))Keywords: SPRINT SOFTBANK/