Sprint Nextel Corporation (NYSE:S), the third largest US telecom operator, is getting entangled in a series of wireless deals. While the bidding war between Softbank and DISH Network Corp (NASDAQ:DISH) is getting intense, Sprint Nextel Corporation (NYSE:S)’s own acquisition proposal to buyout the rest of Clearwire Corporation (NASDAQ:CLWR) is facing difficulties. Last Thursday, the Japanese suitor announced that the Securities and Exchange Commission (SEC) gave a go-ahead to Sprint Nextel Corporation (NYSE:S) to mail proxy material to its shareholders for the most-awaited vote slated for June 12.
However, the SEC’s agreement is not all; Softback has to face one major barrier to convince Sprint shareholders to vote for the deal in the special shareholders meeting. DISH Network Corp (NASDAQ:DISH)’s competing offer of $25.5 billion to Sprint has made Softbank’s candidature a bit shaky. In fact, both suitors got involved in a series of heated arguments. Now Softbank’s main challenge is to persuade Sprint Nextel Corporation (NYSE:S)’s investors that its proposal offers better benefits to Sprint in the long run.
The face-off with Softbank
Softbank made a $20.1 billion acquisition proposal for a 70% stake in the Kansas carrier in the second half of last year. Meanwhile DISH Network Corp (NASDAQ:DISH), which is trying to make a name in the wireless telecom space, tried to partner with Sprint Nextel Corporation (NYSE:S) but failed. Finally it made a counteroffer to the carrier to diversify from its core satellite TV business.
Now the two suitors are engaged in verbal fights with one another. In an interview, DISH Network Corp (NASDAQ:DISH) Chairman Charlie Ergen stated that his bid is undoubtedly superior to Softbank’s offer which is ‘just math’. DISH Network Corp (NASDAQ:DISH) is an American company, which is more culturally and geographically aligned with Sprint’s way of working, and so a Dish-Sprint merger would be easier than a Softbank-Sprint Nextel Corporation (NYSE:S) combination. In addition, Ergen also points out that if Softbank acquires Sprint it would mean US airwaves under foreign ownership, but a combination with Dish would keep the company US owned. Also, DISH Network Corp (NASDAQ:DISH)’s proposal would give 32% of the joint entity to Sprint’s shareholders versus 30% if Softbank’s offer is accepted.
If Dish succeeds in its bid for Sprint, the company plans to offer bundled services to its customers like Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T). Subscribers to these services would be able to watch TV programs on their laptops and tablets using the wireless network.
Also, consumers can continue to benefit from Sprint’s unlimited data plan even after the merger. Dish’s wireless spectrum, combined with Sprint’s, would give the combined entity a solid spectrum position that would be able to hold increased data traffic.
Ergen also has his eyes on Clearwire Corporation (NASDAQ:CLWR)’s spectrum, for which Sprint has made an acquisition bid. He plans to use the airwaves of the combined company to construct a wireless network covering more urban areas. For the rural segment, Dish plans to supply internet using its satellites.
SoftBank CEO Masayoshi Son said that Dish’s plan are mere words, while the Japanese carrier’s plans are more realistic; which aims at enhancing Sprint’s core wireless business and improving services for a better customer experience in the long run.
Softbank says that its merger with Sprint would give higher value to stakeholders than a combination with the ‘highly leveraged’ satellite TV provider. Son also said that Dish’s proposal is ‘incomplete and illusory,’ which would weaken the joint company’s balance sheet with a huge debt burden and restrict capital improvements. The Softbank CEO is confident that Softbank will win over Sprint without raising its offer.