Every spring about this time, you see teens in strangely colored formal wear, stretch limos the size of ocean liners and couples who are too young to order wine in fancy restaurants. Yes, it's prom season again. And right in the thick of prom season is Sprint, trying to decide which of two serious "promposals" it's going to like best.
Now that Sprint has received permission from Softbank, its original date to the prom, to listen to the proposal from Dish Networks, things have started to heat up. Sprint has to choose between an offer from Softbank for $20 billion for 70 percent of the company or Dish's offer for $25.5 billion for all of it. Both purchases include Sprint's buying the remainder of its wireless networking partner, Clearwire, which it doesn't already own.
And make no mistake. This is not a simple choice. On one hand, investors will get a lot of Softbank stock, but 30 percent of their investments will still be Sprint. On the other hand, with Dish Networks, they'll get cash in return for all their stock. But there's a problem here. If Dish is the successful suitor, Sprint may find itself saddled with a lot of debt, according to Miriam Gottfried's insightful analysis in The Wall Street Journal.
Of course, if Softbank buys Sprint, there will still be a lot of debt, just not as much as with Dish. But the equations aren't as obvious as that. Which suitor will be best for Sprint over the long term isn't necessarily the same answer as which suitor will be best for Sprint's investors over the short term.
If you look at the whole financial package, it would appear that the deals are roughly equivalent. Softbank is offering less money for less of Sprint. Dish offers more, but gets all of Sprint. But there is other baggage that each suitor will bring when it comes to courting Sprint's stockholders.
Softbank doesn't have the best track record in its U.S. acquisitions over the years. While it may have learned from its past mistakes, it's still an overseas company trying to run a wireless phone company based in Kansas. Will the cultures mesh? Will Softbank understand U.S. consumers, not to mention U.S. regulators? Equally important, what does Softbank bring to the table besides money? Well, it's a major wireless carrier in Japan, so at the very least, it brings Sprint more buying power, more clout with device makers and maybe some ways to expand its mutual marketing.