With Sprint offer, Dish pursues long-held goal of joining the wireless fray

Satellite television provider Dish Network has proposed to merge with Sprint, offering to pay the telecommunications company’s shareholders $25.5 billion. Dish hopes to head off an earlier bid for Sprint from Softbank, the Japanese wireless company, and to finally achieve its goal of expanding into the wireless business. Hayley Tsukuyama reports:

Under the proposed Dish deal, Sprint shareholders would have a 32 percent ownership stake in the new company and receive $7 per share — around $4.76 in cash and the remainder in Dish stock.

The contest for control of Sprint adds to the industry’s turmoil, writes Cecilia Kang:

The bid is the latest in a string of deals in the telecom industry as cable, satellite and wireless service providers scramble to meet a relentless demand by consumers to watch video, surf the Internet and communicate on any device at any time and anywhere.

For Dish, that means fortifying its satellite and broadband-to-the-home businesses to bring a one-bill provider of wireless services, too.

The $20.1 billion deal with Softbank, announced in October, had the support of Sprint’s management, but would still require federal approval. A merger for Sprint could make the U.S. wireless industry, currently dominated by AT&T and Verizon Wireless, more competitive. Sprint’s business has been poor recently, but if the company were able to invest in faster networks, it could force the larger carriers to improve their services:

In the near term, analysts say, that could mean consumers will continue to have access to data plans that charge one price for unlimited use — a practice the biggest companies have abandoned . . .

Through the [Softbank] deal, Sprint [would] get relief from its crippling $21 billion debt burden. Its financial troubles have stalled upgrades of network speeds to compete with faster services that Verizon Wireless and AT&T have introduced in major U.S. cities. . .

Sprint’s problems are largely of its own doing. It is still reeling from a disastrous and expensive merger with Nextel in 2004, years of poorly rated customer service and its inability to get the iPhone on its system until last year. (Read the complete analysis here.)

Dish has been trying to build a wireless network of its own for some time, and control of Sprint’s airwaves would offer the company a way into the industry. In particular, Sprint and Dish were at odds earlier over a Federal Communications Commission plan to allow Dish access to airwaves at limited power levels. Dish bridled at the limits, which Sprint supported:

“Telling us to lower our power levels cripples our ability to enter the business,” Dish Chairman Charlie Ergen said in a phone interview. “We want to enter the wireless business. We have $6 billion more we want to spend on building out this business. But the FCC could make it extremely risky for us.”

Ergen complained that the FCC has delayed its decision on Dish’s wireless plan by 20 months. If the Englewood, Colo., company had gained approvals earlier, he said, a network could have been built by next year.

Max Ehrenfreund is a blogger on the Financial desk and writes for Know More and Wonkblog.
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