DISH dashes for Sprint with $25BN takeover bid

Editor | 16-04-2013

DISH Network, the second largest satellite TV provider in the US, has launched an audacious $25 billion bid for American telco Sprint.

Sprint is the third-largest US mobile operator with 56 million subscriptions and 16% market share at end-2012, behind Verizon Wireless with a 34% share and AT&T with 31%. As well as being the No 2 satellite firm, DISH, according to data from analyst Informa is the third-largest US pay-TV operator with 14 million subscriptions and 12% market share at the end of 2012.
DISH is offering Sprint shareholders a total consideration of $25.5 billion, comprising $17.3 billion in cash and $8.2 billion in stock. Sprint shareholders would receive $7 per share, based upon DISH's closing price on Friday 12 April 2013. The proposed combination will result in synergies and growth opportunities that DISH estimates at $37 billion in net present value, including an estimated $11 billion in cost savings.
The merger would create a US-wide bundle of in- and out-of-home video, broadband and voice services with specifically, said DISH, necessary broadband spectrum to provide customers with rich content everywhere, all the time.
The bid has come as a shock to a US telco market that was expecting Sprint be bought by Japan’s telecoms firm SoftBank.
Indeed DISH claims that the cash portion of its proposal represents an 18% premium per share over that offered by the SoftBank proposal, and the equity portion represents approximately 32% ownership in the combined DISH/Sprint versus SoftBank's proposal of a 30% interest in Sprint alone. This it says represents a 13% premium to the value of the existing SoftBank proposal.
"The DISH proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal," claimed Charlie Ergen, Chairman of DISH Network. "Sprint shareholders will benefit from a higher price with more cash while also creating the opportunity to participate more meaningfully in a combined DISH/Sprint with a significantly-enhanced strategic position and substantial synergies that are not attainable through the pending SoftBank proposal."
Analysing the deal, Mike Roberts, Principal Analyst at Informa Telecoms & Media, agreed that DISH’s move Dish’s move would combine the third-largest pay-TV and mobile operators in the US, which could be a better strategic fit than Japan’s Softbank combining with Sprint.
“If the deal goes ahead, Dish and Sprint could quickly offer TV, broadband and mobile bundles to compete more effectively with larger integrated telecoms players such as Verizon and AT&T,” he said. “Of course, Softbank also has synergies with Sprint…On the other hand, pulling off a long-distance merger would be a massive challenge. Overall, my first take is that the Dish offer is stronger than Softbank’s both strategically and financially, and will force Softbank to strengthen its offer if it wants to win Sprint."