SoftBank shares drop 17% on Sprint talks Investors in SoftBank have given an early thumbs-down to the company's proposed acquisition of Sprint Nextel, pushing the value of the Japanese internet and mobile phone group down by almost one-fifth in heavy selling on Friday. SoftBank, which operates Japan's third-largest mobile service as well as the Japanese arm of Yahoo, confirmed it was "engaged in discussions" with Sprint, the third-largest US network operator by subscribers. Sprint had confirmed the talks on Thursday. Shares in SoftBank fell 17 per cent to Y2,395 owing to what analysts said were concerns over the likely financial strains involved with such a large deal. Buying a controlling stake in Sprint would cost SoftBank more than $10bn, making for one of the largest overseas purchases by a Japanese company. Keiichi Yoneshima of Barclays Capital said a deal "could hurt Softbank's balance sheet in the near term," particularly if SoftBank were to support a related acquisition by Sprint of its unconsolidated subsidiary Clearwire, a move that SoftBank is understood to be considering and which could push the overall cost closer to $20bn. Japanese media reported that SoftBank was in talks with a group of Japanese banks to secure up to $23bn in loans to finance a deal. SoftBank's billionaire founder Masayoshi Son has made highly leveraged bets on the mobile phone industry before, having muscled his way into the sector by buying Vodafone's Japanese assets in 2006 for Y1.7tn. Until then he had been focused mainly on his internet properties, including Yahoo!, which in Japan is a leading broadband provider as well as a Web portal. The Vodafone deal saddled SoftBank with heavy debts for several years, though analysts say the company's finances are much stronger today. It is sitting on more than $12bn in cash and its net debt is about half this year's projected earnings before interest, tax and depreciation. "We would see no need for excessive concern given plentiful cash flow and a better balance sheet compared with the time of the Vodafone acquisition," Mr Yoneshima said. Much of the credit for the turnround goes to SoftBank's decision to be the first Japanese carrier to support Apple's iPhone when it was introduced in the country in 2008. More established rivals disliked Apple's closed platform or had incompatible networks, leaving SoftBank as the hit product's sole carrier until last year. New competition from a second iPhone carrier, KDDI, may help explain SoftBank's search for growth outside Japan. Pressure to hold on to domestic iPhone customers was cited as reason for another recent acquisition, of eAccess, a smaller Japanese carrier that SoftBank said this month it would buy for $2.3bn worth of shares. That purchase was welcomed by SoftBank investors despite the heavy 200 per cent premium paid by the company. It will give SoftBank Japan's biggest bandwidth and frequency range, areas in which it has trailed in the past. With Sprint, investors may have been unnerved by the failure of an earlier overseas expansion by Japan's biggest mobile carrier, NTT DoCoMo. In 2001 and 2002, after the bubble in tech and telecoms stocks burst, DoCoMo made billions of dollars of writedowns on minority stakes in AT&T Wireless, KPN Mobile, Hutchison 3G UK and other foreign carriers. DoCoMo was undone in large part by the timing of its investments, which were made near the top of the market. But analysts say the expansion also failed to generate promised operational benefits, such as lower costs for purchasing telecoms equipment - a disappointment that may have contributed to doubts about SoftBank's pursuit of Sprint.