Merger-mania continued to spin around the wireless space as this morning Dish Networks put in a $25.5 billion bid to acquire 68% of Sprint Nextel. The deal further spices up current scenarios that have Japan’s Softbank attempting to acquire $70% of Sprint Nextel for $20.1 billion and Dish Networks’ offer to acquire Clearwire at a premium over Sprint Nextel’s current bid to acquire the remaining stake in Clearwire.
Dish’s offer includes $17.3 billion in cash and $8.2 billion in stock of the new combined operations, representing what Dish said is an 18% premium per share over Softbank’s offer and greater control over the new operations. Sprint Nextel’s stock (S) surged more than 15% on the news.
Sprint Nextel acknowledged the offer, stating its “board of directors will evaluate this proposal carefully and consistent with its fiduciary and legal duties.”
“The Dish proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal,” said Charlie Ergen, Dish Network’s chairman. “Sprint shareholders will benefit from a higher price with more cash while also creating 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.”
Dish claims the offer “clearly represents superior value to Sprint shareholders, including greater ownership in a combined company that is better positioned for the future with more spectrum, products, subscribers, financial scale and new opportunities.”
Dish added that the Sprint Nextel proposal did not hinge on it completing the Clearwire deal. Sprint Nextel has said that its acquisition attempt of the remaining stake in Clearwire it does not currently own was dependant on closing the Softbank deal.
Some analysts noted that a combined Sprint Nextel-Dish would be unique in the wireless space as it would be able to offer consumers bundles including satellite television, mobile broadband and voice services.
Beyond the financial commitment, Dish could also bring much-needed spectrum to the venture. The company late last year was granted access to 30 megahertz of spectrum in the 2 GHz band for terrestrial use. That spectrum lines up nearly adjacent to Sprint Nextel’s current 1.9 GHz spectrum holdings, separated only by 10 megahertz of spectrum that the FCC is looking to auction off in the near term.
Dish has been active in recent months securing funds in order to make a potential greater push into the wireless space. The company earlier this month raised $2.3 billion in senior notes that it said would generate proceeds to be used for “general corporate purposes, which may include wireless and spectrum-related strategic transactions.” Ergen told attendees at last year’s PCIA show that the company was looking to enter the space through a partnership with an established carrier, but added that the company was not “suicidal” and would not enter into a venture with no chance of survival.
However, many have noted that it would be fiscally difficult for Dish to enter the mobile space on its own, noting the billions of dollars that would be needed to build out a network and try to compete against established players. Partnering with an established carrier would be the most cost-effective means in which the company could enter the space.
Sprint Nextel, while an already established player in the domestic space and the country’s No. 3 operator, is desperate to gain access to cash in order to move forward with its Network Vision network upgrade program that will also see the carrier rollout LTE services.
The proposed deal also would seem to put to rest rumors that Dish was looking to acquire T-Mobile USA, purchasing Deutsche Telekom’s 74% stake in the venture following its pending acquisition of MetroPCS. However, a final vote on that deal by MetroPCS shareholders was called off at the last second on Friday. That move followed calls from investor services for MetroPCS shareholders to not approve the deal in its original terms, with DT putting in a last minute alteration to those terms to lessen the debt burden of the new operations.
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