The bidding war is on for Sprint. Dish Network submitted a merger proposal to Sprint Nextel's board of directors that offers $25.5 billion for the U.S.'s third-largest wireless carrier.
Dish is proposing a deal that includes $17.3 billion in cash and $8.2 billion in stock. The company's offer trumps an earlier deal presented by Softbank. Under the Dish deal, Sprint shareholders would receive $7 per share, based upon Dish's closing price on Friday, April 12.
Sprint agreed to sell Softbank, a Japanese wireless carrier, a 70 percent stake for $20 billion in October 2012. The Dish deal represents a 13 percent premium to the value of the existing SoftBank proposal. Sprint's shares jumped 16.2 percent, the strongest price increase since September 2008, on the news.
Is Dish a Better Deal?
"The Dish proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal," said Charlie Ergen, chairman of Dish Network. "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."
Ergen said a Dish-Sprint merger would allow the wireless carrier to offer customers a "convenient, fully integrated, nationwide bundle of in- and out-of-home video, broadband and voice services." The combined national footprints and scale, Ergen said, would allow Dish-Sprint to bring improved broadband services to millions of homes that currently have inferior or no access to competitive broadband services.
"This unique, combined company will have a leadership position in video, data and voice and the necessary broadband spectrum to provide customers with rich content everywhere, all the time," he said.
Dish believes 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.
Jeff Kagan, an independent telecom analyst in Atlanta, said both Dish Network and Softbank want something from Sprint Nextel that we are not really thinking about or talking about today.
"They want to place a bet on the future," Kagan told us. "They want to become one of the key players going forward. Not just of the wireless business selling handsets to consumers, but in all the innovation that represents, and in helping other industries wirelessly transform themselves, one at a time,. This is the huge future for the wireless industry."
Going forward, the wireless phone will transform consumers' lives across every industry, he said. It's not just about the phone, or even the automobile. There will be a revolutionary transformation. That transformation is still early, but Dish and Softbank can see it clearly enough to shell out billions to get their hands on Sprint.
"What will the wireless marketplace look like in another five to 10 years? Which companies will be leading the charge on the network side, the handset side and the app side of the wireless business?" Kagan asked. "That is the reason both Dish and Softbank want to acquire Sprint Nextel. And in fact there are other companies as well."