Sprint's Japanese Knight in Shining Armor

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Just because Sprint Nextel (NYSE: S  ) wasn't playing a part in the mashup between T-Mobile and MetroPCS (NYSE: PCS  )  doesn't mean it can't have any M&A fun. There's a lot of possibility in the air, with Sprint even reportedly considering a possible counterbid for MetroPCS a few months down the road.

Turns out that Sprint might actually be a takeover target now, with respectable outlets like Bloomberg and The Wall Street Journal chiming in that Japanese wireless carrier Softbank is mulling over a bid for the third-largest U.S. carrier. Softbank is allegedly looking at either a two-thirds stake or maybe even going all the way and buying all of Sprint. The two numbers floating around are 1 trillion yen to 1.5 trillion yen, or about $13 billion to $19 billion.

Since Sprint is a majority owner of Clearwire (Nasdaq: CLWR  ) , that would entail a stake in that company as well. Indeed, CNBC says that Softbank is interested in full-out acquiring Clearwire as well, in large part because of the struggling operator's valuable spectrum holdings. We're talking about a potentially massive deal, if Softbank acquires both Sprint and Clearwire for entry into the U.S. wireless market.

Sprint and Clearwire bet heavily on WiMAX as the 4G standard of choice, but LTE has won out and the pair has been scrambling to build out their LTE networks while being loaded up on debt. Sprint is currently sitting on $21 billion in long-term debt and capital lease obligations, and Clearwire has another $4.2 billion in net long-term debt of its own.

Softbank could provide financial backing to help support Sprint's ability to compete against the two industry heavyweights, AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) . Any deal certainly wouldn't be structured as a cash transaction, but for reference Softbank had roughly $12.9 billion in cash and equivalents at the end of fiscal 2011.

That money could prove critical in helping foot the hefty capital expenditure bills required to build out a LTE network and compete in a meaningful way, especially as Verizon is preparing to launch LTE in its 417th market in one week.

The chips are in the air and now investors get to see where they may fall.

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Evan Niu, CFA, owns shares of AT&T and Verizon Communications. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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