DISH Network Corp (DISH), DIRECTV (DTV): Revenge Is A Dish Best Served Cold

Other options

Ergen’s focus at Dish is on building a wireless broadband network. He has been amassing airwave spectrum rights, but has said that he needs additional licenses. His current plan is to acquire the assets of LightSquared out of bankruptcy. Dish has put forth a bid of $2.2 billion. There’s still no guarantee that Dish will prevail or if another bidder will emerge.

The other option for Dish being talked about is buying T MOBILE US INC (NYSE:TMUS). T-Mobile is the fourth largest mobile carrier in the U.S. and has the spectrum Ergen is looking for. Hedge fund manager John Paulson became a T-Mobile shareholder after it bought MetroPCS, where he was a large shareholder. In his letter to clients, Paulson said

While the merger closed, we continue to hold the stock as we believe that T-Mobile remains a potential takeover target for either Dish or Sprint.

An acquisition of T MOBILE US INC (NYSE:TMUS) would not be cheap for Dish. It has a current market cap of $7.09 billion, and Dish would have to assume its $17.33 billion in debt. While less than what Dish was willing to pay for Sprint, it’s still not cheap.

Perhaps a more manageable deal would be for Dish to acquire United States Cellular Corporation (NYSE:USM), the sixth-largest carrier in the U.S. It has a current market cap of $3.37 billion and only $879.07 million in debt. There’s also $530.28 million in cash to offset the debt. However, any deal would require the approval of majority owner Telephone & Data Systems.

Foolish assessment

The next move for Dish and its CEO Charlie Ergen is going to be an interesting one. He has a reputation of winning, and I’m sure he’s not happy about having Sprint and Clearwire snatched out from under him.

In my opinion the best deal for Dish would be a merger with DIRECTV (NASDAQ:DTV). The cost savings would pay for itself in no time. Whether or not Ergen is looking to go this route is anyone’s guess. He is certainly playing his cards close to his vest, and we will all be waiting for his next move. Either way, the final decision will benefit Dish shareholders.

The article Revenge Is A Dish Best Served Cold originally appeared on Fool.com and is written by Mark Yagalla.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends DirecTV. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.