In bidding $25.5 billion for telco Sprint Nextel, Dish Network is seeking to remake itself into a next-generation communications company that combines video, broadband and voice services — all available at any time or any place. It's another sign that the TV landscape is changing fast and a mad spectrum grab is on.
If the merger is successful, the combined Dish and Sprint resources will be able to offer broadband, TV and mobile plans as a single unified package. “A 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,” said Charlie Ergen, the CEO of Dish.
Dish said the merger would be cost-efficient and could raise $37 billion in “synergies and growth opportunities,” including cutting an estimated $11 billion in operating costs.
To succeed, Dish must overthrow the planned takeover of Spring Nextel by SoftBank, the Japanese telecommunications company. SoftBank agreed last October to acquire a 70 percent stake in the mobile carrier in a deal valued at about $20 billion.
Dish offered a cash and stock deal worth about 13 percent more than SoftBank’s bid. The offer is valued at $7 a share, including $4.76 in cash and the balance in its shares. Dish would also have to pay a $600 million “breakup fee,” which Ergen said his company is willing to pay.
Dish is confident it can raise the funds necessary for such a large purchase, the Wall Street Journal reported. Under the conditions of the bid, Dish’s shareholders would gain full control over the merged company.
Sprint Nextel, with 56 million subscribers, is the third largest cellphone carrier in the United States. The company has had a tough time competing against much larger carriers like Verizon and AT&T. That competition will increase as T-Mobile USA moves to buy carrier MetroPCS in the coming year.
The move reflects a long history of Dish experimenting with broadband technology. The company battled with Sprint for control of Clearwire last January by placing a rival takeover bid in for the carrier. Dish also gained FCC approval earlier to build its own LTE network.
The merger has some top financial experts working on opposite sides. Barclays is advising Dish Network on its proposed bid. Deutsche Bank, the Raine Group and Mizuho Securities are advising SoftBank. Citigroup, Rothschild and UBS are advising Sprint Nextel.
