SoftBank Says Dish’s Sprint Bid Is Full of ‘Wishful’ Numbers
SoftBank Corp. (9984) Chief Executive Officer Masayoshi Son renewed his attacks on Dish Network Corp., his rival suitor for Sprint Nextel Corp., saying the satellite company would be a poor match for a wireless carrier.
“It doesn’t help to bring a football player to a baseball team,” Son said in an interview. “There’s no synergy between satellite and mobile.”
The SoftBank executive, whose company owns the Fukuoka SoftBank Hawks baseball team, was in New York for meetings with Sprint investors, trying to build support for his $20.1 billion bid for the company. Sprint, the third-largest U.S. carrier, had agreed to SoftBank’s price in October, only to see Dish (DISH) counter with an unsolicited $25.5 billion offer last month.
Son, Japan’s second-richest person, said his bid provides more tangible cost benefits because SoftBank and Sprint could pool their purchases of wireless equipment and handsets. The transaction will save more than $2 billion a year on average from 2014 to 2017, reaching a run rate of $3 billion annually after that, SoftBank said this week in a presentation. The merged companies will also be able to cut Sprint’s capital spending by 32 percent to 36 percent, SoftBank said.
For the past nine months SoftBank has been negotiating with vendors on prices and delivery schedules to provide Sprint (S)’s board with a “very solid” cost-savings estimate, said Son, 55. Because Dish hasn’t done due diligence, its synergy numbers are “wishful,” he said.
SoftBank, Japan’s third-largest wireless carrier, doesn’t plan to raise its bid, which remains on track for a shareholder vote in June, Son said. He expects it to be approved. Sprint, based in Overland Park, Kansas, declined to comment.
Completing the transaction next month would let Sprint start improving its network sooner, rather than having to wait months for the Dish deal to come together, Son said.
Son is squaring off against fellow billionaire Charlie Ergen, the chairman of Englewood, Colorado-based Dish, who points to the higher dollar value of his offer and his own synergy estimates. Dish has said it could produce $11 billion in cost savings because the merging companies could reduce overlap in marketing staff and other business units.
“Obviously I think we have a better offer in front of Sprint,” Ergen said on a conference call yesterday following the company’s earnings report. “I believe that based on what I’ve seen in the last few days from SoftBank presentations and the synergies that they believe are out there.”
Dish also owns wireless spectrum, the airwaves that let mobile devices make calls and connect to the Internet. The satellite company would use its spectrum -- currently dormant -- to bolster Sprint’s network. Dish spent years acquiring the airwaves, part of Ergen’s plan to use the wireless market to offset slowing growth in satellite TV. He estimates that the spectrum is worth $10 billion or more in cash if it were sold.
“Ultimately spectrum is what you need,” said Ergen, 60. If Sprint doesn’t get those airwaves through Dish, one of its competitors might buy them, he said.
“They have a chance to put our spectrum in their column,” Ergen said. “If they don’t, that spectrum is going to compete in some form or fashion with Sprint, right? And then the only thing I can tell you is when a football team has two great quarterbacks, they’ll never trade a quarterback to somebody in their same division because they’d have to play them.”
Son argued that Dish’s spectrum isn’t valuable because it doesn’t work with current devices. The Federal Communications Commission also would have to sign off on its use by Sprint. The airwave licenses were initially approved for a new entrant to the wireless market, meaning there’s no guarantee that Sprint could even use them, Son said.
“It’s like getting the gift of a cow in a Manhattan apartment,” he said. “The cost of keeping the cow is expensive.”
Sprint’s board also is concerned about Dish’s ability to obtain the financing to complete the transaction, as well as the debt that would be placed on the merged company, a person familiar with the deliberations said this week. Sprint’s directors have questioned how the promised cost savings would be produced as well, the person said.
Dish has lined up Jefferies Group LLC to help it finance the proposed acquisition, people with knowledge of the matter said yesterday.
SoftBank, meanwhile, is providing $8 billion in cash to Sprint, an infusion that could help accelerate its turnaround plan. The U.S. carrier is angling to return to profitability after the $36 billion purchase of Nextel Communications Inc. in 2005 saddled the company with debt and led to tens of billions of dollars in losses.
Sprint shares were little changed at $7.36 at the close in New York today. They have climbed 30 percent this year, putting them above the price offered by SoftBank or Dish, suggesting that investors are expecting a bidding war.
Ergen said yesterday that if SoftBank really expects to save $3 billion a year in operating synergies, the company should raise its bid.
SoftBank will probably pay “quite a bit more for Sprint than we have offered so far,” Ergen said. “Both Dish and SoftBank see tremendous value there. Shareholders are going to be the winners, and who knows where this goes?”