Japanese mobile operator Softbank Corp said it will buy up to 70 percent in Sprint Nextel Corp, the third-largest U.S. carrier, for about $20.1 billion - the most a Japanese firm has spent on an overseas acquisition.

The deal, announced jointly by Softbank's billionaire founder and chief Masayoshi Son and Sprint CEO Dan Hesse at a news briefing in Tokyo, will provide entry into a U.S. market that still shows growth, while Softbank's home market is stagnating. It will also give Sprint the firepower to buy peers and build out its 4G network to compete better in a U.S. wireless market dominated by AT&T and Verizon Wireless, analysts have said.

While U.S. analysts have long said the telecoms industry needs consolidation, few looked to Japan as a catalyst for that. But Son, known for his risk-taking, is betting that U.S. growth can offer relief from cut-throat competition for subscribers in Japan's saturated mobile market. Combined, Softbank and Sprint will have 96 million users.

Softbank said that as part of the deal it would buy $3.1 billion of bonds convertible into Sprint stock at $5.25 a share. Sprint shares closed on Friday at $5.73.

Softbank shares tumbled more than 8 percent earlier on Monday, and closed at their lowest in 5 months, down 5.3 percent. The stock has lost more than a fifth of its value - or $8.7 billion - since news first broke late last week of the firm's interest in Sprint. Investors are concerned that Son may be offering too much to enter the United States telecommunications market.

"There is always a risk when you face a big challenge," Son said at the briefing. "It could be safe if you do nothing and our challenge in the U.S. is not going to be easy at all. We must enter a new market, one with a different culture, and we must start again from zero after all we have built. But not taking this challenge will be a bigger risk."

Four banks have approved loans totalling 1.65 trillion yen ($21.1 billion) to Softbank, three sources with direct knowledge of the matter told Reuters earlier on Monday. Mizuho Financial Group Inc, Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Deutsche Bank submitted a commitment letter to Softbank promising the loans on Monday.

Sprint, which has lost money in all of the last 19 quarters, has net debt of about $15 billion, while Softbank has net debt of about $10 billion. Brokers have warned that the deal could leave Softbank with "unacceptably high" gearing, a ratio of its debt to shareholder capital. Standard & Poor's has warned the deal "may undermine Softbank's financial risk profile" and would pressure its free operating cash flow for at least the next few years.

The companies said Hesse would remain as CEO of Sprint.

"It's the same (market) reaction as when Softbank said it was going to buy Vodafone a few years ago. Everyone came out and said it was far too expensive," Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities, said ahead of the announcement.

Softbank bought Vodafone's Japan unit for $15.5 billion in a 2006 deal that propelled the firm into the mobile carrier business. "Son made a company worth 3 trillion yen, and now it will be worth 6 trillion yen. That's quite impressive, and I think investors will realise he's making the right decision down the road," said Nakanishi.

CLEAR FOR CLEARWIRE

Analysts have said that Softbank buying a 70 percent stake in Sprint for $20 billion would imply the No. 3 U.S. wireless company was worth about $28.6 billion, some two-thirds greater than its market capitalization at Friday's close.

Sprint, which is going through a $7 billion upgrade of one of its networks, while closing its Nextel iDen network, could use some of the proceeds to buy the part of Clearwire Corp it doesn't already own, analysts have said. Clearwire has high-speed infrastructure that is attractive to mobile carriers struggling with the increase in data due to the rising numbers of smartphone users. Shares in Clearwire, 48 percent-owned by Sprint, soared on Friday.

An alliance with Sprint could also give Softbank leverage when dealing with Apple Inc, helping bolster its domestic position against KDDI Corp, which also offers the iPhone in Japan, and market leader NTT Docomo, which is yet to offer the Apple smartphone.

SECOND STEP

With Sprint in hand, Softbank may also look to acquire smaller U.S. carrier MetroPCS Communications, Japanese media have reported. Sprint has had a long interest in MetroPCS, which earlier this month agreed to merge with T-Mobile USA, part of Deutsche Telekom AG.

The Sprint deal takes outbound deals by Japanese firms to a record $75 billion this year, Thomson Reuters data shows, underscoring a strong appetite for overseas assets seemingly unaffected by signs of slowing global growth.

This is not the first Japanese foray into telecoms overseas. NTT Docomo racked up big losses after a string of failed investments in names like AT&T Wireless and Taiwan mobile operator KG Telecom in the late 1990s and early 2000s.

Raine Group LLC and Mizuho Securities were lead financial advisers to Softbank.

($1 = 78.3550 Japanese yen)

(The story corrects deal value in headline and first paragraph.)

(Additional reporting by Sophie Knight, James Topham, Andrea Shalal-Esa and Mari Saito; Editing by Gunna Dickson and Ian Geoghegan)