Japanese mobile operator Softbank said Monday it will buy about a 70% stake in Sprint Nextel (S) for $20.1 billion, a move that could provide Sprint with the power it needs to catch up to larger rivals.

About $12.1 billion of the investment will be distributed to Sprint shareholders and the remaining $8 billion will be used as capital to strengthen Sprint’s balance sheet.

In a joint statement, the companies said Softbank’s investment and industry expertise, particularly in smartphones and next-generation high-speed networks like LTE, will help create a stronger, more competitive Sprint.

Together, the companies will have 96 million users.

“This is a transformative transaction for Sprint that creates immediate value for our stockholders, while providing an opportunity to participate in the future growth of a stronger, better capitalized Sprint going forward,” Sprint CEO Dan Hesse said, who will remain chief executive after the transaction closes.

Despite various efforts, including a pricey deal to sell Apple (AAPL) iPhones, Overland Park, Kan.-based Sprint has struggled keep pace with larger rivals AT&T (T) and Verizon Wireless, which is co-owned by Verizon Communications (VZ) and Vodafone (VOD).

Under the terms of the deal, about 55% of current Sprint shares will be exchanged for $7.30 a share in cash and the remaining will be converted into shares of a new publicly traded entity called New Sprint.

The transaction has been approved by both companies’ boards of directors and is expected to close in mid-2013 pending customary closing conditions and regulatory approvals.

Antitrust approval remains a hurdle, though, as the deal brings together the No. 3 mobile players from both the U.S. and Japan, further shaking up a market that underwent a big consolidation just last week when T-Mobile agreed to join forces with MetroPCS (PCS).

AT&T (T) attempted to buy T-Mobile last year for $39 billion, but the deal was squashed amid regulatory pressure.

Shares of Sprint ticked slightly higher on Monday to $5.78, while MetroPCS fell 3.3% to $11.50, AT&T slipped 1.4% to $35.16 and Verizon declined by 1.1% to $44.12.

Follow Jennifer Booton on Twitter at @Jbooton