As Sprint moves forward with the $20.1 billion deal it struck with Japanese wireless carrier Softbank in October, it continues to consider the $25.5 billion merger offer made by Dish Network in April. In a May 8 filing with the U.S. Securities and Exchange Commission, Sprint pointed to new research disputing that the Dish deal would accomplish all that Dish executives have promised.
Scott C. Chandler, managing director of advisory services provider Franklin Court Partners, conducted a study of the Dish offer, Sprint states in the filing, and found Dish's claims "unsubstantiated and unrealistic."
"The analysis finds that Dish's estimate of the net present value of synergies created in the proposed Dish/Sprint merger 'is unusually high and there are multiple reasons to believe that Dish's projections are neither achievable nor credible,'" Sprint wrote in its statement.
Sprint went on to offer a summary of the report's findings. These include cost synergies that are "far higher than non-network synergies projected by acquirers in other large wireless transactions" and the likelihood that claimed synergies will likely be harder to achieve than in other transactions, "because a Dish/Sprint merger would combine two dissimilar companies which operate in different sectors."
Chandler was also skeptical of the pace at which Dish has said its offer will achieve cost synergies, which would be "more than twice the rate in other wireless mergers."
Chandler's report also found Dish's claimed revenue synergies to be "unreasonably large, far exceeding claims made in prior wireless transactions," that Dish failed to account for integration costs, which could run between $2.5 billion and $3.5 billion, and that Dish provided little information about the components of its projected revenue synergies.
"The revenue growth to achieve these synergies runs counter to the current industry structure of slow growth and saturation in each of the competitive Pay TV and wireless communications sectors," Sprint said in its summary.
Dish Network executives presented their pitch to a select few analysts and journalists on an April 15 conference call.
"We bring $11 billion net present value of cost savings and another $24 billion in new opportunity synergies. And our offer is superior; it's more cash, by about $5 billion," Dish CEO and Chairman said during the call.
Tom Cullen, Dish's executive vice president of corporate development, also focused on synergies, explaining, "The most significant and important part of this is focusing on the $37 billion of synergies, operating cost and revenue opportunities. As we've seen in the past, bringing together two subscriber-based, consumer-focused operating entities will yield those types of benefits and this combination is no exception."
Softbank CEO Masayoshi Son called the Dish offer "incomplete and illusory" during an April 30 presentation seemingly designed to counter the claims Dish made April 15. Son also disputed the benefit of the deal to Sprint shareholders, arguing that while Dish claimed that it would provide shareholders with $7 per share to Softbank's $6.22, Softbank says its transaction value is $7.65 per share, versus $6.31 with Dish.
"Softbank delivers superior value to Sprint shareholders. I'm very confident about that," said Son.
Sprint has formed a special committee to consider the Dish offer. Dish's Ergen, apparently not content to wait around and hear their findings, on May 6 filed to acquire a majority share of Sprint stock.
"It makes sense that Dish would want to follow any proceedings or findings that come [of the committee] without having to go through a formal process," Gartner analyst Philip Redman told eWEEK, following the news. "Dish is eager to get moving and doesn't want to have to wait and hear from the press to see if Softbank will counter or not."