April 15, 2013
Satellite-TV provider Dish Network Corp. is making a $25.5 billion bid for Sprint Nextel Corp., an effort to derail the No. 3 U.S. wireless carrier's acquisition by Softbank Corp. of Japan. Dish said Monday it is offering to pay $4.76 in cash and about $2.24 in Dish stock, based on Friday's closing price, for every share of Sprint. Sprint shares closed at $6.22 on Friday. Dish argues that the deal represents a 13% premium to Softbank's complicated proposal to buy 70% of Sprint for $20.1 billion. "Sprint is in play," Dish Chairman Charles Ergen said in an interview in New York. "We think we've made an offer that's much more compelling than the Softbank transaction." Control of the combined company would rest with Dish shareholders, and Mr. Ergen would be its largest shareholder. A Dish spokesman said it's too early in the process to know a number of specifics including who would lead the company and whether Mr. Ergen will serve as chairman of the board. Sprint and Softbank had no immediate comment on the bid by Dish.
The unsolicited offer is Mr. Ergen's most audacious attempt yet to move from the slow-growing pay-television business into the fast-evolving wireless industry. The satellite TV pioneer eased into the industry by amassing spectrum and winning approval from regulators last year to use it to offer land-based mobile-phone service. But he lacks much of the rest of the operation, including a cellphone network, which would be costly and time-consuming to build. Combining his company with Sprint would allow Dish to offer video, high-speed Internet and voice service across the country in one package whether people are at home or out and about, Mr. Ergen said. People who don't have access to broadband from a cable company would be able to sign up for Internet service delivered wirelessly from Sprint cellphone towers to an antenna installed on their roof, Mr. Ergen said.
Taking over Sprint would be a big bite. The wireless carrier booked $35.3 billion in revenue last year, compared with $14.3 billion for Dish. The combined company would carry more than $36 billion in debt, according to CapitalIQ, even before loading on the $9 billion Dish indicated it would borrow to do the deal. Dish said it would be able to execute a definitive merger agreement after reviewing Sprint's books. The satellite company said it is being advised by Barclays, which is confident it can raise the funding. Earlier this year, Dish made an informal offer to buy Clearwire Corp. —a wireless carrier that is half-owned by Sprint and that has agreed to sell Sprint the other half. Dish has yet to move forward with a formal bid. Mr. Ergen said the "deck was stacked against us" with Clearwire due to a tangle of contractual obligations. With Sprint, the only obstacle is a $600 million breakup fee that would be due Softbank. He said he is willing to pay that. It will now be up to the Sprint board to decide whether Dish's bid is superior to Softbank's. If the board decides it is, Softbank will have an opportunity to increase its own offer.
The battle for Sprint pits two of the world's hardest-to-read telecom entrepreneurs against each other. Mr. Ergen, who has kept the wireless industry guessing in the past couple of years about his intentions, is taking on billionaire Softbank CEO Masayoshi Son, whose aggressive deal-making over the past decade has scrambled Japan's telecom market. Mr. Ergen's pitch to Sprint's board and shareholders is that Dish offers much-needed cash as well as assets that Softbank can't match: Dish's spectrum, a satellite-TV business with more than 14 million subscribers, and call centers, back-office staff and equipment installers that when combined with Sprint's could yield cost savings.
Softbank has said that Sprint will benefit from its expertise in building modern wireless networks and its experience challenging larger competitors in Japan. Softbank is a much larger company than Dish, reporting 32 million mobile subscribers in Japan as of March and $25.5 billion in net sales in the last nine months of last year, at current exchange rates. Under Softbank's offer, Sprint would remain a separate publicly traded company, while under Mr. Ergen's offer, Sprint would be combined with Dish. While Dish argues that Sprint would be much stronger in such a combination, the deal would also mean that investors in Sprint would have to value Dish's pay-TV satellite business, which other wireless companies don't have.
Dish's bid for Sprint comes as the U.S. wireless industry is rapidly consolidating, and potential partners are being snapped up. Around the same time as Softbank's $20 billion offer for Sprint last fall, Deutsche Telekom AG agreed to merge its U.S. unit, T-Mobile USA, with MetroPCS Communications Inc., combining the country's fourth- and fifth-largest wireless carriers. Speculation has swirled that any of those companies could be part of Mr. Ergen's strategy to get into the wireless business. Mr. Ergen has said he'd seek to put his spectrum to use by partnering with an existing wireless carrier rather than building out his own network. "We felt like we needed to act now," said Thomas Cullen, Dish's executive vice president for corporate development. Mr. Ergen said he chose to seek deal with Sprint in part because its access to a large swath of spectrum controlled by Clearwire, which Mr. Ergen said would work well for delivering high-speed wireless Internet access in dense areas. Dish said that it anticipated that Sprint's pending deal for the rest of Clearwire would be completed, but that the deal's completion wasn't a condition of its offer for Sprint. Wall Street Journal
Arris Group Inc. announced Friday that it's received Justice Department approval for its purchase of the Motorola Home business from Google. Arris said its $2.35 billion purchase of the Horsham-based cable set-top box business will be completed by Wednesday. Motorola Home makes set-top boxes for Comcast and other cable companies. To help fund the deal, Comcast has promised to buy $150 million in Arris stock. Google and Comcast will each hold about 8 percent of Arris' outstanding shares when the sale is completed. Arris, which is headquartered in Georgia, is a broadband media company that also makes cable boxes. philly.com
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