) - the second largest satellite TV operator in the U.S. - made a
fresh proposal to completely acquire
Sprint Nextel Corp.
), the third-largest wireless carrier in the U.S., for $25.5
billion. DISH Network will make both cash and stock offers to
complete the whole transaction.
In a bid to expand its operation in the lucrative U.S. market,
Japanese telecom carrier, SoftBank Corp., proposed to buy 70% of
Sprint's stake for a total consideration of $20.1 billion.
However, DISH Network outbids SoftBank's proposal by making a
counter offer of $7 per share (inclusive of $4.76 in cash and
0.05953 shares in Dish for each Sprint share).
DISH Network's objective to acquire Sprint Nextel came on the
back of achieving FCC's recent approval to set up wireless
network across its footprint. The acquisition of DBSD North
America Inc. and TerreStar Networks Inc. for $2.9 billion, has
given DISH Network access to 40 MHz of satellite spectrum.
Such a massive spectrum portfolio will not only allow DISH
Network to set up wireless network but will also enable it to
offer triple-play services (voice, video and data) to its
customers, thereby controlling subscriber loss. Moreover, the
S-band wireless spectrum will also help the company to deliver
online HD movies to its customers whether at home or away.
However, DISH Network's plan to set up wireless network
without any wireless partner will be an extremely difficult task
as it requires huge investment and marketing support. So, to move
on with its set objective, the company had earlier bid for
Sprint's sister concern -
) - at $3.30 per share.
The deal looks a little complicated as Sprint has already
proposed to buy Clearwire for $2.97 per share. Moreover,
Clearwire has already entered into a deal with its parent company
to take financial help for deploying 4GLTE across its
We believe that if DISH Network is successful to acquire
Sprint, it will generate positive synergies for both the
companies in terms of countering stiff competition from market
) and Verizon Communication Inc., which dominate nearly 35% of
the U.S. market. Moreover, the combined entity (both DISH and
Sprint) will have nearly 60 million subscribers coupled with $14
billion cash position.
Likewise, it will also allow Sprint to overcome its spectrum
shortage issue and will also help the company to gain financial
strength to deploy 4GLTE service across its footprints.
On the flip side, the successful completion of the deal will
also generate few negative synergies for both the companies. The
complete acquisition of Sprint Nextel will inflate DISH Network's
leverage position by a huge margin as the combined debt of both
the companies will stand at nearly $28 billion.
DISH Network exited fiscal 2012 with an enormous $11.6 billion
in long-term debt and $7.4 billion in cash. So, a further issue
of debt will increase the financial risk for the company in terms
of higher interest payments and increased leverage.
Recently, DISH Network raised $2.3 billion debt from the
market. In the next five years, senior notes worth $4.7 billion
will mature for DISH Network. Moreover, a debt of $500 million
will be due in the current year. Hence, we believe that constant
maturity of debt during this five-year period will not only
affect DISH Network's cash position but will also impact its
future plan to rollout mobile broadband network across its
This will also hurt Sprint as the company will pay nearly $600
million as break-up fee to SoftBank.
Hence, we believe that it is just the beginning of a new war
and SoftBank will respond back strongly with a better offer as
the company has already hedged the falling yen against the U.S.
dollar (SoftBank hedged its Japanese currency at $1 = 82.2 yen).
Moreover, Japanese banks are ready to lend at the lowest possible
rate, thereby helping SoftBank to raise more debt for buying out
Currently, DISH Network has a Zacks Rank #3 (Hold).
CLEARWIRE CORP (CLWR): Free Stock Analysis
DISH NETWORK CP (DISH): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
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