Dish Network's Buyout Bid Further Tangles Sprint's Merger Options

By Wayne Rash  |  Posted 2013-05-06 Email Print this article Print

Meanwhile, Dish is offering to buy all of Sprint, and Dish has its own supply of spectrum, making the spectrum from Clearwire less critical. What Dish doesn't have is experience running a wireless telecom company. But Dish may have a solution, according to rumors reported by Investors Business Daily, in the form of Mexican Billionaire Carlos Slim. Slim not only has almost as much money as Warren Buffett and Bill Gates, but he has a phone company already operating a wireless company in the US.

Slim's company, American Movil, owns the TracFone prepaid network. This network is owned in part by AT&T, but Slim owns most of it. TracFone, however, does not own its own spectrum. But if Investors Business Daily is right, it doesn't need it if Slim partners up with Dish, which has plenty. While TracFone uses AT&T's network, there are other synergies, including that Dish and American Movil are involved in a satellite television operation in Mexico, so they're already used to working together.

So where does this leave Clearwire? If Dish succeeds in buying Sprint, it can then buy Clearwire without opposition. This would give Dish two wireless networks, Sprint and Clearwire, rolled up in one company and Dish would own everything.

Dish is betting that its offer to Sprint will be seen as superior to Softbank's offer in two ways. First, it gives the shareholders more money, and second, Dish is based in the U.S., which is likely to be seen more favorably by the Federal Communications Commission and other regulators. But there's another twist.

By stepping up with a formal intent to buy Sprint, Dish has effectively put the Softbank merger on hold. This in turn means that Clearwire isn't going to be bought by Sprint, because Sprint needs Softbank's money to buy Clearwire. Dish, especially if the company is teaming with Carlos Slim, will have the money to allow Sprint to buy Clearwire.

On the other hand, if the transaction with Clearwire doesn't happen quickly and if the Dish acquisition proposal drags on, Clearwire may run out of funds and declare itself bankrupt. It's not clear what would happen to the spectrum Clearwire currently owns if this would happen, but it would make Sprint worth less money because its share of Clearwire would be worth less. That, in turn, would make Sprint's value drop.

So what's actually going to happen? Nobody knows, but if Sprint's Special Committee were to decide that Dish was making a superior offer, that would clear some of the uncertainty. However, Softbank would likely sue and that could delay the merger. And have we mentioned that there's a rumor that Verizon Wireless might want part of Clearwire? One thing is clear, however, and that's the likelihood that this situation will become more complicated before it's over.



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