The announcement that DISH Network Corp (NASDAQ:DISH) was interested in acquiring Sprint Nextel Corporation (NYSE:S) was no surprise to those who watch the stock market. In fact, it seems reading news of DISH Network Corp (NASDAQ:DISH) trying to buy up yet another cell phone provider is almost a daily thing these days.
As a quick review, DISH Network Corp (NASDAQ:DISH) has already reportedly considered several other companies, including T-Mobile. As wireless providers battle to win customers away from Verizon and AT&T Inc. (NYSE:T), merger talks are a natural part of growth.
The offer from DISH Network Corp (NASDAQ:DISH) came as Japanese wireless carrier SoftBank was in the process of buying the company. According to reports, DISH offered $4.76 billion, plus more than $2 billion in DISH stock. The company is rumored to be heading into the cell phone business, after having bought wireless spectrum valued at up to $12 billion by the FCC. When the FCC gave DISH Network Corp (NASDAQ:DISH) the go-ahead to use that spectrum late last year for a mobile phone service, rumors began to fly that DISH may soon offer bundling of services.
Why Sprint Nextel Corporation (NYSE:S)?
While Sprint Nextel Corporation (NYSE:S) still lags behind Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) in the U.S., it had a liquidity of $9.5 billion as of December 2012. But the company’s $1.32 billion loss in the fourth quarter makes it clear that it has to do something. Analysts say a merger between DISH and Sprint Nextel Corporation (NYSE:S) could provide serious competition for Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T), which dominate the cell phone market due in part to their internet and TV services.
DISH chairman Charlie Ergen made it clear that DISH hopes to provide customers bundle service if the merger goes through. DISH’s goal is to give customers a TV, Internet, and phone bundle that will save them money, while luring customers away from other cell phone services.
SoftBank, on the other hand, believes it is the better deal for Sprint Nextel Corporation (NYSE:S) customers, stating that working together, Sprint and SoftBank will be able to get better deals on phones. These savings will be passed on to customers. Still, a merger with SoftBank will likely have no significant impact on the Sprint we know today.
Verizon and AT&T bundling
The DISH-Sprint rumors aren’t a far stretch for analysts, who are already aware of DIRECTV (NASDAQ:DTV)‘s partnership with Verizon. Both Verizon and DIRECTV (NASDAQ:DTV) allow customers deals on each other’s services when bundled together. Verizon offers phone and cable services as well, but the company suffered a $1.93 billion loss in the fourth quarter of last year.
AT&T’s U-Verse has been more of a success story, with analysts saying that U-Verse is setting the company apart from competitors. According to the company’s CFO, U-Verse is now a $10 billion annualized revenue stream, and grew 38% last year.
It must be working. Unlike Verizon and Sprint, AT&T reported quarterly revenue of $32.6 billion in Q4 2012. As AT&T continues to roll out new residential service throughout the U.S., the wireless provider is definitely the one to watch.