Japanese operator Softbank has responded to Dish Network’s rival offer to buy Sprint Nextel by saying that its offer is superior.
“Softbank believes that the agreed terms of our transaction with Sprint offer Sprint shareholders superior short and…
Japanese operator Softbank has responded to Dish Network’s rival offer to buy Sprint Nextel by saying that its offer is superior.
“Softbank believes that the agreed terms of our transaction with Sprint offer Sprint shareholders superior short and long term benefits to Dish’s highly conditional preliminary proposal,” it said in a statement.
Softbank and Sprint executed a merger agreement last October for a US$20.1bn deal whereby the Japanese telco would acquire 70% of the number three US operator.
Yesterday, that transaction was thrown into disarray after Dish threw a US$25.5bn spanner into the works. The DTH provider’s cash and stock bid envisions a combined Dish/Sprint business, unlike Softbank’s offer which would see Sprint remain independent.
Should the Japanese telco decide to increase its offer it would have to contend with the change in exchange rate. When Softbank agreed to buy Sprint a dollar was equal to Y98.33. This rate has now fallen to Y78.43, which would make any counter offer more expensive for the Tokyo-headquartered operator.
As part of its offer, Softbank provided Sprint US$3.1bn financing in form of a seven-year convertible bond, which can be converted into 590 million Sprint common shares at US$5.25 per share after all regulatory approvals have been obtained. Softbank also negotiated a US$600m break-up fee.
However, on a conference call yesterday Dish executive vice president Tom Cullen said it was “more than willing” to pay the fee. Acknowledging the convertible bond, he said that Softbank would be a 5% shareholder in Dish Sprint and that Dish would welcome the Japanese telco’s expertise.
The Dish offer would involve integrating 40MHz of AWS spectrum, which the FCC gave the DTH operator the go-ahead to use for LTE last December.
Weighing up the two bids, one analyst cited Dish management’s lack of expertise in the wireless industry as a negative against its bid. “They have at best a cursory understanding of the wireless business,” said New Street Research analyst Jonathan Chaplin in a memo. “One of the most compelling elements of the Softbank combination is that Softbank has a proven track record of turning around a struggling wireless asset.”
“Softbank has a choice: they can increase the value of their offer or they can let investors choose,” Chaplin said.
“We don’t think Softbank is prepared to lose Sprint and they have substantially more resources than Dish. As such, Dish may force Softbank to pay more, but it is unlikely that Dish will prevail.”
In a note, Yankee Group analyst Rich Karpinski said that as neither tie-up brought Sprint more subscribers, its shareholders should look at the best financial terms on offer. However he also had a warning for its board: “Sprint management should be leery of taking on another complex operational combination after dealing with the bruising aftermath of its Nextel acquisition for so many years.”
