Last year SoftBank sent waves through the wireless industry when it made a $20 billion offer for 70 percent Sprint. The name SoftBank might not have been familiar to many, because it’s a Japanese company. By buying Sprint they’re making a big move into the lucrative US market. The deal was expected to close at some point this quarter, but a US company has thrown a wrench in that: this morning we learned that Dish has submitted a bid for Sprint.
Dish has already set up a site, explains his company’s position and why the Dish offer is superior to that of Softbank. There is also a fact sheet, though many of them are phrased as opinions (e.g., “Offers superior shareholder value,” which is up for debate). The long and short: Dish is deadly serious about acquiring Sprint.
On one level, the move might look a bit odd. Sprint is a larger company than Dish, and we don’t often see the smaller company making a bid for the larger one. But on the other hand, Dish has $10 billion in cash, which, according to FierceWireless, is about the level of Exxon Mobil. That extra cash in hand allows Dish to make an offer that another similarly sized company cannot.
The idea is to create a total communications solution. Dish already has its cable TV service in millions of homes, and Sprint reaches many millions more through cellular connections. A combined company would have massive reach. With a single account a customer could potentially fulfill all media and entertainment needs. “There really is no one company on a national scale that puts it all together,” said Ergen. “The new Dish/Sprint company will do that.”
There are problems, of course. For instance, the combined Dish/Sprint entity would carry $36 billion in debt, plus the amount Dish borrows to complete the transaction. So while they’re offering shareholders a higher cash payout and a greater ownership in the combined company than SoftBank, they’re also taking on a lot more risk. But the rewards could be even higher, as Dish claims the combine company could earn $50 billion in revenues.
Like most merger and acquisition information, much of this is inside baseball. Dish has made it clear that wireless is a priority, and it does have spectrum holdings. By acquiring Sprint, and perhaps Clearwire along with them, they could not only make an enormous mobile play, but also improve upon the spectrum it acquires with these two resources.
The consumer takeaway: this could be just the thing needed to move Sprint into closer competition with AT&T and Verizon. The deal with SoftBank might give them more combined subscribers, but that counts subscribers from Japan, which isn’t a very relevant metric for US comparisons. With Dish, Sprint could make a serious marketing play and expose itself to a whole new brand of consumer, one who wants a whole package of services under one umbrella.
The next step: waiting to see if SoftBank makes a counterproposal. If they do, it could be the start of a long bidding war between SoftBank and Dish.
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