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A DISH Network Corp. (DISH) Best Served Short

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During the last few months, the airwaves have been buzzing with telecom M&A news. The telecom industry is nearing its maturity, forcing cash-rich players to look for acquisitive growth instead of organic growth.

The most fascinating acquisition struggle has been raging on in the U.S. telecom industry. The Japanese telecom giant Softbank and DISH Network Corp. (NASDAQ:DISH) are trying to acquire Sprint Nextel Corporation (NYSE:S). On the other hand, Dish and Sprint are also facing off in an effort to control Clearwire Corporation (NASDAQ:CLWR). Recent developments indicate that this struggle is all but over, and the winners are set to soar on their victories.


Bidding War

Softbank and DISH Network Corp. (NASDAQ:DISH) have been engaged in a closely contested bidding war to acquire Sprint Nextel Corporation (NYSE:S) over the last few months. The Softbank deal was facing resistance from Sprint’s shareholder, who wanted the $25.5 billion (for 100% ownership) Dish proposition. To overcome this resistance, Softbank has increased its $20.1 billion offer to $21.6 billion. This would give investors a payout of $7.65, up from earlier offers of $7.30. However, this increase would come at the cost of a 78% ownership of Softbank (70% in the previous deal) and $3 billion less direct capital investment from Softbank. DISH Network Corp. (NASDAQ:DISH) has declined to increase its offer for Sprint Nextel Corporation (NYSE:S), which makes Softbank the winner of this bidding war.

Softbank can be a good long term partner to Sprint. The Dish deal would have created a highly leveraged company, which would not have been able to invest in infrastructure. Softbank doesn’t only have the necessary wireless experience (it is the third largest telecom operator in Japan), but can also bring the cash that Sprint Nextel Corporation (NYSE:S) needs to compete with Verizon and AT&T.

According to Softbank, it will close the Sprint deal by July. Softbank Chief Executive, Masayoshi Son, has made his intentions clear by outbidding DISH Network Corp. (NASDAQ:DISH). Son plans to become the top telecom provider in Japan and has been making acquisitions to achieve this goal. The Sprint Nextel Corporation (NYSE:S) deal will open doors for Son in the United States by give Softbank control of the third largest U.S. telecom operator.

Lucrative Airwaves

Dish’s attempts to acquire Sprint were weak to begin with, but the company was totally committed to its Clearwire Corporation (NASDAQ:CLWR) bid. Sprint Nextel Corporation (NYSE:S) already owns a 51% stake in Clearwire and was willing to pay $3.40 per share to minority shareholders, to gain total control of the company. Just like the Softbank bid, this offer had also met with heavy resistance from shareholders and Clearwire board. The shareholders thought DISH Network Corp. (NASDAQ:DISH)’s $4.40 offer superior, despite the legal hurdles it faced.

In an extraordinary move, Sprint has increased its offer to $5 per share. This should all but seal the fate of Clearwire Corporation (NASDAQ:CLWR). The new offer also includes a $115 million break-up penalty that Clearwire will have to pay if the deal doesn’t succeed. According to Sprint Nextel Corporation (NYSE:S), the new deal has support from 45% of Clearwire’s minority shareholders. The telecom giant still needs to win over more shareholders because any deal will require support from at-least 50% minority shareholders. There are strong expectations that Sprint will take control of Clearwire Corporation (NASDAQ:CLWR), as the shareholder meeting will approve the $5 per share bid on June 24.

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