Crest Financial and Mount Kellett are not the only ones against Sprint’s takeover proposal; Dish has also asked the regulators to closely investigate Softbank and Sprint’s deal. If Softbank’s acquisition proposal is blocked, Sprint would not possess the required cash to fulfill Clearwire’s takeover bid and this would clear Dish’s path. The takeover proposals of Softbank – Sprint and Sprint – Clearwire are being assessed by the US Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the Department of Homeland Security (DHS). Dish has requested the regulator evaluate the consequences of such a deal as it leads to too much US spectrum under the control of a foreign player. It is essential for the regulators to gather more information regarding the effects of the proposed merger as it would not only bring a huge swathe of airwaves under the control of one company, but make it accessible to a foreign entity. Once the review process is complete from DOJ’s end, it would pass on to the FCC. There are high chances that the entire review process would delay the pending merger. This could have a negative impact on Sprint’s competitive strategy to catch up to larger players AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). If the third largest carrier effectively wants to contend in the wireless market, it is mandatory to receive the capital infusion before it is too late.
Looking ahead
The Kansas carrier’s postpaid market share has been shrinking, while the iPhone deal with Apple Inc. (NASDAQ: AAPL) is eating away profits due to the massive subsidy given to iPhone buyers. In all this Softbank’s cash infusion is the only ray of hope for Sprint’s survival, else the Network Vision would get really tough to fulfill given Sprint’s debt loaded balance sheet. There are decent chances that the FCC would give a go-ahead signal to the Softbank – Sprint transaction as a way to encourage healthy competition in a market of a virtual duopoly led by AT&T and Verizon.
Once Softbank’s acquisition of Sprint is cleared, the latter can also opt to collaborate with Dish. It would not only be beneficial for Dish which wishes to make an existence in the wireless space, but also prove fruitful for Sprint as it would get access to Dish’s spectrum which can be put to wireless use. There are several obstructions in the way of the deal; however it would be interesting to watch how Sprint finds its way out to get stronger.
The article Endless Hurdles May Threaten This Telecom Deal originally appeared on Fool.com and is written by Rajesh Marwah.
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