First, the news: This morning Dish Network (DISH) announced an unsolicited $25.5 billion bid to buy Sprint Nextel (S), the third-largest U.S. wireless carrier behind Verizon and AT&T. Now the questions.
What happened to SoftBank?
Nothing, other than a Monday morning surprise. SoftBank, a Japanese cellular firm with a confusing name, had agreed in October to buy 70 percent of Sprint for $20 billion in cash and stock. The boards of directors of both companies approved the deal, and it looked all but done—regulators were scheduled to weigh in next month, with no significant opposition expected. Now the pressure is back on SoftBank to sweeten its offer.
A bidding war?
The markets seem to think so. Dish’s bid, at roughly $7 a share, represents a 13 percent premium over SoftBank’s. Sprint shares opened around $7.20 this morning, a sign that investors expected SoftBank to sweeten its offer; trading has mellowed out since.
What’s in it for Dish, aka the meanest company in America?
A more competitive offering. Dish says that buying Sprint would make it the only company that can offer a “convenient, fully-integrated, nationwide bundle of in- and out-of-home video, broadband and voice services.” That’s a shot at Sprint’s wireless competitors: Verizon and AT&T both have TV offerings, but they have been costly. “I would fully expect Dish to be hugely disruptive in the mobile business, but still decently profitable,” said Wunderlich Securities analyst Matthew Harrigan. “It could even be more disruptive than its entry into the TV business in the ’90s.”
Are there regulatory issues?
Probably not. Given the power of Verizon (VZ) and AT&T (T), analysts don’t expect a Dish-Sprint tie-up to hit antitrust hurdles. On the contrary, Dish says the deal would be particularly good news for rural consumers who don’t have access to traditional broadband. If there’s anything FCC commissioners like, it’s rural consumers.
How about that David Einhorn?
Right? Einhorn’s Greenlight Capital snapped up a bunch of Sprint shares as the company swooned in recent years. At the end of the first quarter last year, when Sprint shares were wallowing below $3, Greenlight had 68 million of them.