May 9, 2013 8:26 pm

Dish and SoftBank trade blows over Sprint

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The billionaire telecoms moguls fighting for control of Sprint Nextel continued their public spat on Thursday, with Charlie Ergen of Dish and Masayoshi Son of SoftBank pleading their case to shareholders.

Both men are jostling to control Sprint, the third-largest US wireless carrier, as the US mobile phone industry undergoes a massive round of upheaval, with old rivals partnering up and new entrants looking for seats at the table.

Mr Ergen, whose Dish Network has made a rival $25.5bn bid for Sprint to top the agreed $20.1bn SoftBank offer, spoke as his company reported first-quarter results, and said he was confident he could win Sprint.

“From a regulatory point of view, I don’t have any doubt that Dish-Sprint can get done,” Mr Ergen said. “And I have no doubt that we have a higher offer on the table.”

Mr Ergen made his offer nearly a month ago. But a special committee of Sprint’s board is still deciding whether to invite a formal bid from Dish.

Dish reported a 40 per cent decline in net profits. Its core satellite television business is mature, and faces bleak growth prospects as US consumers turn to online video.

As a hedge, Dish has amassed billions of dollars worth of wireless spectrum that it wants to use to bolster Sprint. This would allow Mr Ergen to offer consumers bundled offerings of wireless video, phone and internet.

Meanwhile, Mr Son, in New York to court Sprint shareholders, said in an interview that investors were “starting to digest what we’ve been telling [them], and the response has been pretty good”.

Mr Son said if Sprint were acquired by Dish it would be sidelined for about three years, as the deal closed and then as Dish incorporated its spectrum into the new company.

“They’ll kill the company,” added Ron Fisher, president of SoftBank.

SoftBank said it expects to close its deal in the coming months, and would then invest billions into Sprint.

Dish and SoftBank are also jockeying for control of Clearwire, a wireless internet provider that would bolster Sprint’s spectrum holdings.

Mr Ergen on Thursday disclosed that he had made new debt and equity investments in both Sprint and Clearwire. Dish said it had acquired Clearwire debt valued at $950m at the end of March, in addition to a small $75m equity stake in Sprint as well as $592m in derivatives linked to Sprint’s equity trading price.

Yet even as Mr Ergen manoeuvred for a blocking stake in Clearwire, Mr Son said he believed Sprint’s current ownership stake was enough to achieve his objectives. “At at worst case, 68 per cent ownership through Sprint and majority board control is sufficient to do arm’s length transactions,” Mr Son said.

Mr Son also said the spectrum Dish would contribute to Sprint might be valuable, but would cost at least $6bn to deploy. “It’s like getting the gift of a cow in a Manhattan apartment,” Mr Son said. “It costs more to keep the cow alive.”

Mr Ergen acknowledged that if SoftBank raised its bid, Dish might be forced to bring in a strategic partner rather than add to the merged company’s projected debt levels, an issue that already concerns some analysts and Sprint shareholders.

Some analysts have speculated that Japan’s NTT DoCoMo, with deep knowledge of the mobile telecoms sector, might help Dish persuade Sprint shareholders to back its bid.

But Mr Son dismissed the threat of such a partnership. “At least we have had experience with DoCoMo, and we have already won,” he said, referring to SoftBank’s dominant market share in Japan.

If Dish’s offer for Sprint is rebuffed, Mr Ergen said that going direct to shareholders with a hostile bid was one option that could be considered. Other options might include the sale of Dish’s extensive spectrum holdings which it values at “$10bn or more”, a partnership with another company, or the sale of Dish as a whole.

Firing back, Mr Son said there were no good precedents for bundling mobile phone and satellite service, a linchpin of Mr Ergen’s proposal. “I’ve never seen even one successful case in the world for bundling satellite and mobile and being able to get a meaningful number of customer acquisition,” he said.

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