Sprint/Softbank mobile merger in doubt after Dish bids $25.5bn

Clearwire complications add to financial fandango

The Essential Guide to IT Transformation

Analysis Dish Network has thrown a counter-offer into the ring to buy Sprint-Nextel, the third-biggest mobile provider in the US, in a $25.5bn cash and stock bid that outspends rival Softbank by well over 10 per cent.

"The DISH proposal clearly presents Sprint shareholders with a superior alternative to the pending Softbank proposal," said Charlie Ergen, chairman of DISH Network, in a canned statement.

"A transformative 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," Ergen said. "The combined national footprints and scale will allow DISH/Sprint to bring improved broadband services to millions of homes with inferior or no access to competitive broadband services."

In October, Japanese internet and communications provider Softbank put in an offer of $20.1bn for 70 per cent of Sprint, currently a distant third in the US mobile market behind the AT&T/Verizon duopoly. Sprint was an early adopter of 4G, but unfortunately the standard it adopted was Intel's WiMAX rather than LTE. This has left it with spotty coverage and needing massive investment to expand.

Dish, the second-largest US satellite TV provider and owner of an increasing amount of spectrum, objected to that deal, and is now offering $17.3 billion in cash and $8.2 billion in stock for Sprint and its assets, a 13 per cent premium on Softbank's offer. Dish is trying to break out of its dated satellite market and become a new force in the US mobile provider network, but it needs partners.

In a frosty statement, Sprint said that it had received an "unsolicited proposal from DISH Network to acquire the Company." The board said it was evaluating the offer and would not make any further comment at this time.

Clearwire complications

The situation is complicated by a bidding war between Sprint and Dish for the future of wireless broadband service provider Clearwire. Flush with expected cash from the expected Softbank deal, Sprint announced a deal in December to acquire the 49 per cent of Clearwire that is doesn't already own.

Dish objected to that deal and launched its own rival $2.2bn bid for the minority stake – on the condition that Clearwire actually build a network on its spectrum that Dish can use. Then on Friday Verizon also reportedly made a $1.5bn offer for parts of Clearwire's spectrum – but only if the Softbank merger went ahead.

Dish is serious about roiling out a new combination of satellite, wireless, and mobile service to American consumers, and based on past performance it will do so in an aggressive manner with serious amounts of investment. The company has been raising funds on the market and has now obviously has decided to cut out the middleman and go for the big prize of Sprint itself.

It's a typically ballsy move by Dish's founder, chairman, and overarching glorious leader Charlie Ergen – a man renowned for micromanaging his company he set up in a way that makes Steve Jobs look like a blissed-out hippie.

Ergen started in the business selling satellite dishes door-to-door, and still owns a majority shareholding that helps make him worth an estimated $11bn. He runs a very tight ship; personally signing off on any expenditure of over $100,000 and enforcing Kim Jong Un levels of control over staff.

This year's Glassdoor survey saw Dish Network ranked the worst place to work in America, with employee comments such as "Quit" and "You're part of a poisonous environment ... go find a job where you can use your talents for good rather than evil," Bloomberg reports.

Staff reported that they are expected to work long hours and overtime, and if you're one minute late to sign up for work, an automatic email is pinged to HR and occasionally to Ergen himself. Management abandoned a card-entry system in favor of fingerprint logins (in case friends tried to beat the system by logging each other in), and if bad weather threatens, staff say they are expected to book a hotel nearby at their own expense so they aren't late for work.

That said, the company is highly profitable, and some staff are rewarded with stock options that have made them very wealthy, indeed. But Dish has one extra advantage for the Sprint deal besides lots of money and drive: possible government backing.

Yankee Doodle Dandy

The proposed merger between Softbank and Sprint has caused concern in Washington over the issue of Chinese infiltration of the American homeland.

In October the US House of Representatives Intelligence Committee (a contradiction in terms if ever there were one) issued a report recommending that Huawei and ZTE – whose equipment Softbank uses – be blocked from selling hardware in the US on the grounds that their connections with the Chinese government make them a security risk.

China slammed the move as "protectionism," but government buyers are now blocked from buying from Huawei and ZTE kit no matter how cheap it is, and the proposed merger caused concern among congressional members, particularly those with technology constituencies and/or sponsors.

In order to smooth the passage of its proposals, Softbank offered to not only ensure that the combined company would not buy Chinese hardware, but would rip out any Middle Kingdom kit it was currently using, cancel some existing orders, and ensure that Clearwire bought solely from other vendors as well.

Congress appeared satisfied, but that was when Softbank was the only game in town. Now there's a new bidder – one that's as American as apple pie and drone strikes – and industry regulators might be tempted to favor a local boy, particularly such a Horatio Alger-esque figure as Ergen. ®

Build a business case: developing custom apps

More from The Register

next story
Scotland's BIG question: Will independence cost me my broadband?
They can take our lives, but they'll never take our SPECTRUM
Trying to sell your house? It'd better have KILLER mobile coverage
More NB than transport links to next-gen buyers - study
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
iWallet: No BONKING PLEASE, we're Apple
BLE-ding iPhones, not NFC bonkers, will drive trend - marketeers
NBN Co adds apartments to FTTP rollout
Commercial trial locations to go live in September
Samsung Z Tizen OS mobe is post-phoned – this time for good?
Russian launch for Sammy's non-droid knocked back
prev story


Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Backing up Big Data
Solving backup challenges and “protect everything from everywhere,” as we move into the era of big data management and the adoption of BYOD.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.