Dish offered $25.5 billion in cash and stock on Monday for Sprint, which Dish says beats the offer from Japan's Softbank Corp. Softbank is offering $20 billion in cash, and shareholders get to keep 30 percent of Sprint. Dish is offering $17.3 billion in cash, and Sprint shareholders get 32 percent of the combined Dish-Sprint.
Sprint Nextel Corp.'s stock jumped on the news, as investors started looking forward to a bidding war between Dish and Softbank. Sprint had accepted the Softbank offer and was expecting to close on it this summer. Sprint, the country's third-largest cellphone carrier, said it would evaluate Dish's offer.
Charlie Ergen, Dish's executive chairman, has been looking for a way into the wireless world for years. Dish has been buying space on the airwaves for cellphone service or wireless broadband. The Englewood, Colo., company has tried to partner with cellphone companies to put its spectrum rights to use, but has been repeatedly rebuffed.
"People have generally blown him off and not taken him seriously," technology consultant Tim Farrar said. "This is really saying 'We are serious.'"
On a conference call Monday, Ergen said that Dish is a better fit for Sprint because combine its spectrum rights with Sprint's. Dish can also use its army of satellite dish technicians to install antennas for wireless broadband on customer's roofs, creating a competitor to cable and phone-line broadband. It could also save money by combining its call centers and back-end functions with those of Sprint.
"You want to be in your home with video, broadband, and data, and voice, and you want to be outside your home with those same things," Ergen said. "And while the cable industry does a really good job in your home, and the current wireless industry does a really good job outside your home, there's really no one company on a national scale that puts it all together. The new Dish-Sprint will do that."
Dish said that its proposed transaction includes $17.3 billion in cash and $8.2 billion in stock. Sprint shareholders would keep 32 percent of the combined company, compared with 30 percent under the Softbank deal. Sprint stockholders would receive $7 per share, which is a 13 percent premium to its Friday closing price of $6.22. This includes $4.76 per share in cash and 0.05953 Dish shares per Sprint share.
Shares of Sprint rose 84 cents, or 14 percent, to $7.06 - above the offered price - in morning trading. Dish shares fell $2.63, or 7 percent, to $35.
Dish said that the cash portion of its bid is an 18 percent premium over the $4.03 per share implied by the Softbank offer.
Ergen said during the conference call that Dish believed that Softbank undervalued Sprint. Although he would not say whether Dish would raise its bid for Sprint if Softbank came back with a higher offer, he said that Dish would be more than will to pay the $600 million breakup fee for Sprint and Softbank to terminate their proposed transaction.
Another component of the Sprint purchase is wireless network operator Clearwire. In December, Sprint agreed to buy the portion of Clearwire it didn't own for $2.2 billion.
The deal would give Sprint control of an affiliate it depends upon to provide high-speed "Sprint 4G" data services on some of its phones. The Clearwire deal is contingent on the Softbank deal going through, Sprint lacks the money to complete it on its own.
Dish made its own bid of about $5.15 billion for Clearwire in January. Ergen said that Dish has not formally withdrawn its Clearwire offer and that its Sprint buyout bid is not contingent on Clearwire going through with the Sprint offer.
Dish has 14.1 million TV subscribers, making it the No. 2 satellite-TV company after DirecTV. Sprint, which is based in Overland Park, Kan., has 55.6 million wireless devices on its network.