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UPDATE 8-Sprint confirms in talks on potential sale to Softbank

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* Deal would give Softbank cheaper access to smartphones

* Deal could also lead to solution for Clearwire-analysts

* Sprint, Clearwire soar in afternoon trade, MetroPCS sinks

(Recasts lead paragraph, adds deal data, updates shares)

By Taro Fuse and Sinead Carew

TOKYO/NEW YORK, Oct 11 (Reuters) - Japanese mobile carrierSoftbank Corp may buy a majority stake in Sprint NextelCorp to establish a foothold in the U.S. wireless market,in what could be the largest Japanese acquisition ever inAmerica.

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 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), according to a source withdirect knowledge of the matter, adding that the Japanese companyis in talks with several banks to borrow money to finance a bid.

A second 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.

Sprint shares rose as much as 19 percent to levels not seensince the summer of 2011, on the heaviest volume in the stock'shistory. The shares of wireless carrier Clearwire Corp ,which could play a key role in any deal, rose 38 percent.

"The addition of Softbank would provide a deep-pocketedpartner - removing any financing risk and meaningfully reducing(Sprint's) ongoing cost of capital," Evercore analyst JonathanSchildkraut said.

At $12.8 billion, the deal would be almost one-third largerthan the previous top Japanese deal in the United States, NTTDocomo's 2000 investment in AT&T Wireless.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Reuters video: Softbank in stake talks Sprint confirms Breakingviews: Softbank catches Japanese M&A bug ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 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. It is in themiddle of a costly network upgrade that has led it to consider arange of partnerships.

One analyst said Sprint might be the Japanese company's onlyoption if it is eyeing the American market.

"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 whether to make a bidfor smaller rival MetroPCS Communications Inc , whichagreed this month to merge with Deutsche Telekom AG'sT-Mobile USA.

It was unclear what effect, if any, a Softbank deal mighthave on Sprint's potential pursuit of MetroPCS, whose sharesfell 3.7 percent to $11.59 in afternoon trading.

Sprint may also be attractive because it has a majorityinterest in Clearwire, which owns desirable spectrum, WellsFargo's Fritzsche said. Evercore's Schildkraut said Softbank andClearwire are both upgrading their networks to the samestandard, which might add synergies.

"It doesn't make sense for them to do something with Sprintwithout having a solution for the Clearwire issue," said ShingYin, an analyst at Guggenheim.

The reports notwithstanding, the atmosphere was calm atSprint headquarters in Overland Park, Kansas on Thursday. Sprinthas been a key employer in the state's wealthiest county, asevidenced by the upscale shopping centre across the street fromits offices.

"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."

WEALTHY FOUNDER

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.

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

As it chases market share, Softbank said this month it wouldbuy smaller mobile service operator eAccess Ltd in a$1.84 billion deal. It said the buy would give it a total of 39million users, just ahead of KDDI's 36 million.

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.

Wells Fargo's Fritzsche said regulators would likely lookfavourably upon a deal that would bring an outside internationalplayer to the United States.

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 and Carey Gillam in OverlandPark, Kansas; Writing by Ian Geoghegan and Ben Berkowitz;Editing by Ron Popeski, Bernadette Baum, John Wallace and AndreGrenon)

((Ben.Berkowitz@thomsonreuters.com)(+1-617-856-4334)(Reuters

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