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The third-largest U.S. wireless carrier Sprint Nextel Corp. (S - Analyst Report) is in talks for a potential ownership stake sale to the Japanese cellphone company Softbank Corp. The company is in negotiations to sell about 70% of its stake to Softbank for $12.8 billion.

Sprint is in the midst of a multi-billion dollar restructuring program known as Network Vision. Through this plan, the company is concentrating on the core Sprint platform, which includes CDMA, WiMAX and Long-Term Evolution (LTE) technologies, and eventual termination of the Nextel platform (iDEN business). Though the company has enough liquidity to address the growing costs of the network upgrade, iPhone subsidies, debt maturities and working capital requirements, yet it is in need to bolster its liquidity position for certain buyout.

The potential transaction would provide Sprint the financial support to build and improve its competitive wireless network. Additionally, the company would be able to shore up its balance sheet and potentially buyout Clearwire Corp. , in which it already holds about 48% ownership, by raising new equities.

Although there is no guarantee of the deal, it could involve a change of control of Sprint. Further details of the deal have not been disclosed. The shares of Sprint jumped 14.3%, while Clearwire’s shares surged 71% following the news.

The Softbank-Sprint deal would be the fourth biggest deal on earth this year and could also change the dynamics of the whole wireless industry, which has been dominated by the two carriers - Verzion Communications inc. (VZ - Analyst Report) and AT&T Inc. (T - Analyst Report). Following the transaction, the monopoly would be minimized with Sprint also having one of the best networks.

Coming to Softbank, the deal would be highly beneficial as it is exploring ways to enter the U.S. market to offset its weak domestic operations. This would be the biggest international deal by a Japanese carrier.

We are maintaining our long-term Neutral recommendation on Sprint with a Zacks #3 (Hold) Rank.

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