The potential takeover of Sprint, which Japan's leading Nikkei business daily pegged at being worth $23 billion, would also be one of Japan Inc.'s biggest-ever overseas expeditions.
Other reports have put the deal's price tag at about half that figure.
Investors threw cold water on the potential marriage as shares of Softbank, Japan's third-biggest carrier, plunged almost 17 percent to 2,395 yen on the Tokyo Stock Exchange Friday.
"Investors were discouraged by the possibility that the company could be saddled with a heavy financial burden," said Kenji Shiomura, strategist at Daiwa Securities.
"Putting aside whether the deal could be successful in the long run, the market is cautious."
Sprint Nextel confirmed Thursday it was talking with Softbank, sending its US-traded shares 14.3 percent higher to $5.76.
On Friday Softbank also confirmed it was in talks to buy a controlling stake in Sprint, the third-biggest US carrier, but the move prompted Standard & Poor's to put the Japanese firm credit rating under review, saying it would heap pressure on its balance sheet.
The Nikkei reported Friday that Softbank was also eyeing fifth-ranked US carrier MetroPCS Communications at just a fraction of the Sprint price tag. Softbank declined to comment on that potential deal.
Acquiring Sprint and MetroPCS could total 2.0 trillion yen ($25.5 billion), and make Softbank the world's No. 3 mobile player, putting it just behind China Mobile and US-based Verizon Wireless, the report said.
Softbank, little known outside Japan, is perhaps the country's most colourful and dynamic among the major mobile carriers, headed by tech entrepreneur Masayoshi Son.
Its outlets across Japan were the first to carry Apple's iPhone and the company's well-known television commercials feature a talking snow-white dog -- and American actor Tommy Lee Jones.
The Japanese firm plans to buy more than two-thirds of Sprint's outstanding shares, but the Nikkei said a sharp jump in Sprint Nextel's share price could derail the acquisition plan.
"The scale of the Sprint deal is massive and, frankly, difficult to fully dissect at this point," said Toshiyuki Kanayama, market analyst at Monex.
The news comes a week after T-Mobile USA unveiled its own plan for a merger with MetroPCS in a deal that would boost the fourth-largest US wireless carrier's effort to compete in the fast-growing American market.
T-Mobile's parent Deutsche Telekom will hold a 74 percent stake in the new company.
Some analysts said the Softbank offer for Sprint could be part of a more complex effort to acquire MetroPCS before the T-Mobile deal is consummated.
Softbank would then be positioned to take a run on T-Mobile to create a rival with the scale to challenge the big two US operators, AT&T and Verizon.
"We are still looking for details of the deal and where the synergies will lie," said Shinkin Asset Management fund manager Naoki Fujiwara.
"The debt burden is a concern... The scale of the prospective deal is bold, and if successful it will significantly raise Softbank's revenue and status."
This is not Softbank's first big-money deal.
In 2006, it bought the struggling Japanese arm of Vodafone for about 1.75 trillion yen, while earlier this month it announced plans to acquire smaller rival eAccess Ltd for $2.3 billion.
The talks come as Japanese firms increasingly eye overseas deals amid slowing domestic demand and a surging yen, which hit record highs on the dollar late last year and remains strong.
Japanese firms have spent $66 billion in 559 overseas acquisitions so far this year, and are well on the way to exceeding last year's record of $84 billion, according to data provider Dealogic.