(Source: Venture Beat)
Dish offers a 13 percent premium over Japanese telecom's bid for roughly same seven-tenths stake

Just when it appeared that Japan's fastest growing mobile carrier, Softbank Corp. (TYO:9984), had a deal wrapped up to partially acquire Sprint Nextel Corp. (S) -- America's third largest cellular network and largest prepaid provider -- satellite TV superpower Dish Network Corp. (DISH) has disrupted those plans with an aggressive offer of its own.

I Dish Sweetens the Pot

Like Softbank, Dish's deal would see Sprint shareholders retaining about a three-tenths (32 percent) of the company.  However, Dish is upping the ante, offering $25.2B USD in cash and stock -- a price of around $7 USD per share (1 Sprint share = $4.76 USD in cash and ~0.05953 DISH shares).

That deal represents roughly a 13 percent premium over Softbank's bid, though that number could float given the basis on DISH shares.  The offer is based on $8.2B USD in cash from Dish's stockpile and $2.3B in debt offerings.

Nick Brown, a telecommunications analyst with Espirito Santo investment bank, was bullish on the deal, telling Reuters, "The offer from Dish appears credible since it has the financing lined up and can justify a higher price than SoftBank's offer because of the synergies with its existing operations in the U.S."

Charlie Ergen v. Masayoshi Son
Charlie Ergen (Dish/Echostar) and Masayoshi Son (Softbank) both serve as joint chairman and CEOs of their firms.  Both have a penchant for driving a hard deal.  And both hate to lose. [Image Source: Sawyer Speaks (left); Bloomberg (right)]

The offer could bring billionaire telecom mogul and Dish Chairman Charlie Ergen's dreams of owning his own cellular network to fruition.  Amid a reported spectrum shortage, Mr. Ergen has been tucking away billions in lightly used spectrum.  While Softbank's financial funding of cash-strapped Sprint's LTE push has been viewed as a key upside of that deal, Mr. Ergen's surplus spectrum could offer an even more aggressive injection into Sprint's LTE push.

The combined company would have $50B USD in current revenues and 63.1m subscribers.  Dish said it hoped to leverage synergy from the potential deal to bundle its satellite TV and Sprint cellular services.  In its letter regarding the proposed deal, Dish claims these synergies would save the combined company $11B USD annually.

II. Analysts are Split -- Both Softbank and Dish are Great Matches, They Say

Vijay Jayant, an analyst at ISI Group, comments, "Forget the execution, next move is there a bidding war for Sprint and how big does it go and how expensive does it get? Dish has synergies SoftBank does not (have)."

Jennifer Fritzsche, a telecom analyst at Wells Fargo & Co. (WFC), says that Softbank is likely the preferred buyer by Sprint's management, due to its long-standing track record in the industry; however, the Dish deal is more lucrative.  She writes in a research note, "Ergen and his team clearly bring a better financial offer."

All eyes are now on Softbank for its response.  Softbank could potentially sweeten its offer.  Chief Executive Masayoshi Son is known as a ferocious negotiator.  So don't expect Softbank to necessarily go quietly into the night.

Sprint sign
Sprint has two attractive potential mates vying for its interest. [Image Source: Scott Lippincott]

Sprint had also tentatively agreed to Softbank's proposal; so there may be legal or financial repercussions should it back out.

Needless to say this one should be an interesting storyline to watch in coming months.  A carrier that has long been kicked around by the U.S. marketing and struggling has suddenly found itself in the relatively unusual role of having two large, highly attractive suitors vying for partial ownership in it.  

Whoever wins the battle for Sprint will likely play a key role in America's telecommunications future for at least the next decade.

(Sprint has issued a short response to the "unsolicited offer" saying it is going to review it carefully.)

Sources: Dish, Sprint, Reuters

"I modded down, down, down, and the flames went higher." -- Sven Olsen

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