UPDATE 9-Sprint in talks on potential sale to Softbank


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

* Nikkei says Softbank would also pursue MetroPCS

* Deal could lead to solution for Clearwire - analysts

* Sprint, Clearwire soar in afternoon trade; MetroPCS flat

(Adds Sprint investor, Nikkei report, 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.

But Softbank's ambitions may not stop with Sprint; Nikkeireported that the Japanese company was aiming to use Sprint as avehicle to make a run at smaller Sprint peer MetroPCS , atwo-step transaction that would potentially cost more than 2trillion yen ($25.55 billion).

That would make for the biggest overseas acquisition by aJapanese company ever, and vault Softbank into the top 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 withseveral banks to borrow money to finance a bid, according to asource with direct knowledge of the matter.

A second source familiar with the situation, who would notspeak on the matter publicly, said Softbank was after a roughly70 percent stake in Sprint, which it would achieve by buyingsome shares directly from Sprint and tendering for the rest.

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. Shares of wirelesscarrier Clearwire Corp , which could play a key role inany deal, soared 55 percent.

Sprint owns almost half of Clearwire, and a major Sprintinvestor said any Softbank investment should be used to buy outthe rest of Clearwire, which would add attractive high-speeddata assets.

"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.

Clearwire declined to comment. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 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 Softbank's only option ifit 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 bidding for MetroPCS,which agreed this month to merge with Deutsche Telekom AG's

T-Mobile USA.

MetroPCS shares rose 1 percent in afternoon trading afterinitially falling sharply. T. Rowe Price's Martino said that ifSoftbank and Sprint owned Clearwire, they would not needMetroPCS, a company that has been in Sprint's sights for sometime.

The atmosphere was calm at Sprint headquarters in OverlandPark, Kansas on Thursday.

"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.

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 lookfavorably on 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, Martinne Geller in New Yorkand Carey Gillam in Overland Park, Kansas; Writing by IanGeoghegan and Ben Berkowitz; Editing by Bernadette Baum, AndreGrenon and John Wallace)




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