My prediction
The way it looks, I think that Dish Network will lose the bid for Sprint to SoftBank. However, I believe that Clearwire’s support for the deal with Dish Network will remain constant. Therefore, Dish Network will buy a significant stake in Clearwire Corporation (NASDAQ:CLWR), and will have to share ownership with Sprint Nextel Corporation (NYSE:S). This means the ClearWire spectrum will be shared between Sprint and Dish Network. However, Dish Network doesn’t have any use for that much wireless spectrum, so it would technically have to buy out T MOBILE US INC (NYSE:TMUS).
T-Mobile is currently the fourth largest carrier in the United States and also suffers from network quality issues. Currently, T-Mobile has a $16.2 billion market capitalization with a debt to equity ratio of 1.7 (Sprint’s debt to equity ratio is 3.8). This implies that the combined merger of T MOBILE US INC (NYSE:TMUS) and Dish Network will be less levered, giving it the leftover capital it needs for capital expenditure.
Sprint and Softbank Corp (USA) (OTCMKTS:SFTBF) may have to contend with serious competition from the T MOBILE US INC (NYSE:TMUS) and Dish Network duo. Sprint recently filed a suit to fight off the Dish Network purchase of Clearwire Corporation (NASDAQ:CLWR)’s spectrum. Sprint used this as a dispute:
Dish Network has repeatedly attempted to fool Clearwire’s shareholders into believing its proposal was actionable in an effort to acquire Clearwire’s spectrum and to obstruct Sprint’s transaction with Clearwire.
To be honest, I highly doubt Sprint Nextel Corporation (NYSE:S) will win this case because, to me, it sounds like a frivolous lawsuit that’s being used merely to buy some time, perhaps long enough for Sprint to merge with SoftBank and use their combined resources to buy Clearwire Corporation (NASDAQ:CLWR).
Conclusion
DISH Network Corp (NASDAQ:DISH) will have difficulty getting into the telecom space because of how leveraged it is.
There are two case scenarios: the first case is Sprint pairing up with SoftBank, and perhaps an eventual buyout of Clearwire using Softbank Corp (USA) (OTCMKTS:SFTBF)’s excessive capital resources. The other possibility is Dish Network buying out slightly less than half of Clearwire Corporation (NASDAQ:CLWR), then buying out T MOBILE US INC (NYSE:TMUS).
In the end, both SoftBank and Dish Network will participate in the United States telecom space.
The article SoftBank and Dish Network Will Buy Out Sprint, T-Mobile, and Clearwire originally appeared on Fool.com and is written by Alexander Cho.
Alexander Cho has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
