We were all certain the Sprint-Softbank deal was set in stone. Sprint was making a power play for the remaining portion of Clearwire, which was needed to finish the deal. Softbank was coming up with the needed capital, and two middle-of-the-road carriers of their respective markets were to be one. In a time of blocked mergers and failed acquisitions, it seemed so easy.
DISH Network has long been a shark, circling the school of Mobile carrier fish. They made an attempt to wrestle Clearwire from Sprint long ago, and were famously flirting with Google regarding a network of some sort. DISH has an angle here… and it’s a good one. They want to bundle everything we want, together, making themselves the go-to provider for… anything, really. TV, Internet, Cellular service… you name it, they want to provide it. Competitors (like Verizon and their FIOS service) exist, but none offer a truly complete array of services.
DISH is proposing $25.5 billion for Sprint, and is leveraging the farm to get there. They’ve been offering debt to raise capital, which usually smells of a failing company needing to jettison fat for a Chapter 11 filing. DISH, however, may have smelled blood in the water… and been raising cash for a Sprint offer.
This offer has gone to the Sprint Board of Directors, and is (quite frankly) much better than their standing offer from Softbank. The $25.5 billion consists of $17.3 billion in cash considerations, and $8.2 billion in stock options. This price represents a premium of about 18% per share over the Softbank deal, and gives shareholders 32% equity in the newly formed company. Softbank was offering Sprint shareholders a 30% interest in Sprint alone.
This deal also bodes well for the future, as it gives the newly formed company much more opportunity. A Sprint/DISH deal would offer us that ‘go to’ option DISH so clearly covets, and we’d be happy to have available. Charlie Ergan, Chairman of DISH Network, said this about the deal: “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.”
Getting involved this late in the Softbank-Sprint deal means DISH would have to pay a $600 million termination fee to Softbank, but they’re willing to do so. Overall, this is a premium price for a very mediocre provider in Sprint. DISH is absolutely focussed on having spectrum, and purchasing Sprint is a very quick way to get there.
Sprint, conversely, would be crazy to not entertain this offer. Softbank’s CEO is a bit enigmatic, and a wildcard. Nobody is really sure what his motivations are for wanting Sprint, and we’re not sure what the future would bring for the new company. With DISH, the terms are not only transparent, they’re better. Shareholders not only get immediate satisfaction by way of a sweetened monetary deal, they get a better stake in the new company… a company with much better growth potential than Softbank can offer.
Clearwire continuing to get cash from Sprint may have rubbed some the wrong way, and a deal with DISH would go a long way in healing those internal misgivings. DISH has already lost out on Clearwire, so purchasing Sprint is their only viable option right now for gaining a network. For consumers, the option to have a source for all things digital has been a long time coming, and presents benefit and growth for more than one industry.
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The fact that Dish is “mortgaging the farm” to raise capital for this venture smacks of desperation and does NOT bode well for the merged companies. An undercapitalized company with huge debt, little chance to compete with the big players, little chance Sprint will be able to complete its LTE roll-out and a BIG risk of going chapter 11. Being a one-stop shop has not been much help to AT&T .