Who knew that satellite television hardware and services provider Dish Network would have both the money and the chutzpah to bid $25.5 billion to move into the shark-infested wireless carrier business? Nonetheless, this is what Dish did on April 15 when it offered that amount—mostly in cash—for Sprint Nextel.
Dish Network, based in Meridian, Colo., is offering to pay shareholders $17.3 billion in cash and $8.2 billion in stock, or $7 per share. This represents a 13 percent premium to the value of the existing SoftBank proposal, Dish Network Chairman Charles Ergen wrote in a letter to Sprint Chairman of the Board Jim Hance.
Japan's Softbank, No. 3 in its market, is attempting to move into North America by acquiring Sprint Nextel, currently the third-largest U.S. telecom company behind AT&T and Verizon Wireless. On Oct. 15, 2012, Softbank announced plans to take control of Sprint Nextel by purchasing a 70 percent stake for $20 billion. That deal is still pending.
Dish Chairman: "Dish-Sprint Will Be a Superior Company"
However, Dish believes it brings more to the table for customers than Softbank can provide, Ergen said during a call with analysts.
"Dish-Sprint will be a superior company, combining the third-largest wireless carrier with the third-largest pay TV provider," Ergen said. "We could become maybe No. 2 or even No. 1."
Ergen said 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."
The proposed combination will result in "synergies and growth opportunities estimated at $37 billion in net present value, including an estimated $11 billion in cost savings," Ergen said.
Dish Network, which services about 14 million subscribers in the U.S., would consolidate its home broadband and television businesses with the Sprint cell phone operation into a single service—and monthly bill—for its customers, simplifying the process for users.