Little should surprise us in the world of telecom M&A, but DISH Network's $25.5 billion proposal to buy Sprint-Nextel is a doozy.
The satellite company's offer is 20 percent higher than the $20.1 billion offered late last year by Japan's SoftBank to buy 70 percent of Sprint. DISH's bid works out to $7 per share for Sprint shareholders, consisting of $4.76 in cash and $2.24 in DISH stock. The Englewood, Colo.-based satellite provider says when all of the math is done, its deal works out to be worth 13 percent more than SoftBank's offer.
"The DISH proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal," said Charlie Ergen, chairman of DISH Network. "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 has been itching to provide nationwide wireless phone service, and this would obviously make a big splash in that arena. Sprint's vast spectrum and existing wireless services would enable it to do so.
"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," Ergen added. "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."
Sprint is America's third-largest wireless provider, trailing Verizon Wireless and AT&T by a significant margin. T-Mobile USA, with its pending acquisition of MetroPCS, is nipping at the Overland Park, Kan.-based operator's heels.
This is certainly an example of David trying to buy Goliath. Sprint, the Wall Street Journal noted, saw revenues of more than $35 billion last year, compared to a little more than $14 billion for DISH. In addition to the potentially bigger payoff for Sprint shareholders, DISH already has the back-office staff, call centers, equipment installers and other infrastructure that could prove to be a cost-savings for Sprint down the road when compared to what SoftBank brings to the table.
The ball is now in SoftBank's court, noted Mike Roberts, principal analyst with Informa Telecoms & Media, upon hearing the DISH-Sprint news.
"Overall, my first take is that the Dish offer is stronger than Softbank’s both strategically and financially, and will force Softbank to strengthen its offer if it wants to win Sprint," Roberts said.
In recent months, DISH and Sprint have been battling head to head over a proposed purchase of Clearwire, the national broadband provider headquartered in the Seattle area.
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