Sprint, the No. 3 cellphone company in the United States, is selling a controlling stake to Japan's Softbank for $20.1 billion.

The deal, announced Monday in Tokyo, positions Sprint Nextel Corp. as a stronger competitor to U.S. market leaders Verizon Wireless and AT&T, though it doesn't solve all of the company's underlying problems.

Under the deal, Sprint shareholders can turn in 55 percent of their shares to Softbank in exchange for $7.30 per share. Softbank is paying $12.1 billion for the 55 percent stake. It's buying an additional $8 billion worth of shares from the company, for a total stake of 70 percent.

Sprint, which is based in Overland Park, Kan., has been limping along since 2005, when it bought Nextel. The merger quickly turned sour, saddling Sprint with the cost of running two incompatible networks while customers fled.

Softbank Corp., a holding company with investments in Internet and telecom businesses, made its own venture into the wireless world in 2005, with the acquisition of Vodafone Japan.

It turned that business around, giving president Masayoshi Son the confidence that he can make Sprint a profitable company again after five straight years of losses.

On its own, Sprint would have a hard road ahead, as it pays for both a network revamp and $15.5 billion in iPhones from Apple.

advertisement | advertise on newsday

The deal, which still needs approval from Sprint shareholders and U.S. regulators, is the largest foreign acquisition ever by a Japanese company.

The combination of Softbank and Sprint will tie with AT&T for world's No. 3 mobile company by revenue after China Mobile and Verizon, according to Softbank.

The deal leaves three of the four national U.S. wireless companies with complete or substantial foreign ownership. Vodafone Group Plc of Britain owns 45 percent of No. 1 Verizon Wireless, and Deutsche Telekom AG of Germany owns T-Mobile USA outright.