The SoftBank-Sprint-Clearwire-Dish Network Game Of Musical Chairs Seems Over

By Stephen D. Simpson, CFA | June 21, 2013 AAA

In a process that has taken eight months now, it looks like SoftBank is going to succeed in its attempt to acquire Sprint (NYSE:S), and that Sprint is going to succeed in its attempt to acquire the remainder of Clearwire (Nasdaq: CLWR). The fly in both ointments, Dish Networks (Nasdaq:DISH) has apparently abandoned its efforts to acquire Sprint, and likewise appears to be unwilling to try to once again top Sprint's bid for Clearwire.

This all probably brings this particular chapter to a close, but those who think the story in U.S. wireless, broadband, and telecom M&A is over don't know the nature of the parties involved.

Sprint Will Go To SoftBank
Dish Network made it official on Friday that the company had ended its pursuit of Sprint, a move that will allow Softbank to go ahead with its nearly $22 billion deal for the rest of the company. When it was all said and done, Dish couldn't match the firepower SoftBank brought to the table – while Dish's bid of $25.5 billion was certainly nominally larger than SoftBank's, once SoftBank boosted the cash portion of the offer by $4.5 billion (to $16.6 billion), it was pretty much over. With that, Dish Network will buy back the $2.6 billion in debt that it had raised to pay for a bid for the third-largest wireless carrier in the U.S.

I would expect things to get interesting for AT&T (NYSE:T) and Verizon (NYSE:VZ) in the near future. SoftBank has been a disruptive competitor in Japan for some time now, and CEO Masayoshi Son has the modest goal of someday running the biggest company in the world. Although upping the cash portion of the Sprint bid is going to draw away some funds that the company had set aside for investment into the business, a SoftBank-owned Sprint is going to be a formidable competitor in the coming years.

SEE: How To Pick The Best Telecom Stocks

And Clearwire Goes To Sprint
It would seem that Dish Network is likely going to be a two-time loser in this game of musical chairs, as the company also appears unlikely to succeed in its bid for Clearwire. Although Dish Network coveted Clearwire's spectrum and was quite successful in stirring up resentment against what was initially a low-ball bid by Sprint, here again it seems the company is destined to lose. Dish had bid $4.40 per share for Clearwire, but Sprint ultimately went to $5 (nevermind the “final offer” of about $3 per share back in January of 2013), and I don't think Dish can prevail here either – not when Sprint owns just over 50% and has already gotten the support of some third-party Clearwire investors.

So What's Next For Dish Network?
In principle, the right thing for Dish Network to do is to call up DirecTV (NYSE:DTV) and merge the country's two satellite TV providers. There would be pretty meaningful synergies here, not to mention meaningful international growth potential.

But in the bizarro world that is Dish Network, merging with DirecTV is probably the last option on the list. Dish Network owns spectrum and wanted to get into the wireless market for some time – having lost out on MetroPCS to T-Mobile (which now trades as T-Mobile US (Nasdaq:TMUS)) and now Sprint. Who knows what happens next. I don't see why Dish Network couldn't make a bid for T-Mobile US, or maybe Leap Wireless (Nasdaq:LEAP).

I'm not saying that these would be good moves or value-creating propositions, but it just seems very “un-DISH-like” for the company to quietly go away and give up its wireless ambitions. Who knows, maybe Dish Network somehow tries to get itself involved Verizon's rumored attempts to acquire the 50% stake of Verizon Wireless owned by Vodafone (NYSE: VOD) – again, it's not that I see any particular logic in such a move, but nothing about Dish thinking it would ultimately prevail with Sprint or Clearwire was particularly logical.

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