Dark Horse Dish Network Bids on Sprint Nextel

by Matt Klassen on April 16, 2013

In October, 2012 Japanese company Softbank made a bold move in the American wireless market, tendering an offer sheet to Sprint Nextel to purchase 70 percent of the company for a cool $20.1 billion. While some decried more foreign ownership of American goods and services, many saw the deal as a welcome influx of cash for Sprint to continue to 4G LTE rollout. In fact, to help with the rollout Sprint then moved to purchase additional spectrum from its former WiMax partner Clearwire…and its here that things got complicated.

Several months after Softbank’s merger proposal and Sprint’s offer to purchase spectrum from Clearwire, dark horse Dish Network entered the fray, making its own offer to Clearwire to purchase that spectrum. Now, clearly unsatisfied with its last minute attempt to scoop spectrum away from Sprint, Dish Network has decided to try another eleventh hour tack, announcing yesterday that it has tendered a deal to Sprint itself to purchase the wireless company for $25.5 billion.

While creating a saga worthy of day-time television, the proposal itself, while unexpected, isn’t really a surprise given Dish Network’s increasing interest in the wireless market. The offer itself serves as a significant increase on Softbank’s proposal and, in the words of Dish Network CEO Charlie Ergen; the deal will create the opportunity “to participate more meaningfully in a combined Dish/Sprint with a significantly-enhanced strategic position and substantial synergies that are not attainable through the pending Softbank proposal.” But even with more money on the table, there are still decisions to be made.

As mentioned, while unexpected this proposal comes as the centrepiece of Dish Network’s desire to entire the wireless market. With the company’s core satellite-TV services slowing amid growing competition, Dish had been looking for ways of bundling its product with wireless services in an attempt to make its services more comprehensive, and thus more desirable.

As Ergen explains, “A transformative DISH/Sprint merger will create the only company that can offer customers a convenient, fully-integrated, nationwide bundle of in- and out-of-home video, broadband and voice services. Additionally, the combined national footprints and scale will allow DISH/Sprint to bring improved broadband services to millions of homes with inferior or no access to competitive broadband services. This unique, combined company will have a leadership position in video, data and voice and the necessary broadband spectrum to provide customers with rich content everywhere, all the time.”

On the surface it may seem like Dish Networks’ eleventh hour offer is the only real choice for Sprint shareholders, despite the fact that it offers more immediate return for investors, the most attractive part of the Softbank deal was that it would immediately inject some life back into Sprint, with a portion of the purchase price slated exclusively for infrastructure development.

In the end, the decision will likely come down to what Sprint shareholders are ultimately interested in. If collectively they are interested in reviving the Sprint brand, then Softbank still stands as the more attractive option; but if they’re looking for immediate gains coupled with an uncertain future, then clearly Dish Network’s proposal will be picked. Whatever the case, things are about to get a lot more interesting in the wireless market over the next several months.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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