Japan’s SoftBank, which is keen to make an entry into the U.S. telecom industry, raised its bid from $20.1 billion to $21.6 billion for the third-largest U.S. carrier Sprint Nextel Corporation (NYSE:S). The foreign telecom player’s takeover bid has been contended by satellite provider DISH Network Corp (NASDAQ:DISH)’s $25.5 billion proposal.
SoftBank made this move to ensure that DISH’s rival bid becomes absolutely unattractive for the Kansas-based carrier. The revised bid was announced just a day before Sprint’s shareholders’ meet which was scheduled for June 12. The meeting has been pushed back to June 25.
So, what changes has the Tokyo-based carrier made to fend off the rival bid from DISH Network Corp (NASDAQ:DISH)?
Better terms
As per SoftBank’s revised proposal, the company would increase the cash infusion by $4.5 billion to $16.6 billion. The Japanese player plans to fund its acquisition using the proceeds of its bond sales and loan from four banks. The increased cash pump is extremely crucial for Sprint Nextel Corporation (NYSE:S). This would equip the carrier with the much needed capital to fight and effectively compete with larger rivals Verizon and AT&T. SoftBank said that it would increase its stake in Sprint from 70% to 78% and buy shares from shareholders at $7.65 a share instead of $7.30 a share.
The improved offer has been approved by Sprint’s special committee board. But there is more of good news for SoftBank.
Paulson’s change of heart
In addition, SoftBank has already secured the support of the shareholders’ advisory firm Institutional Shareholder Services (ISS). ISS considers that SoftBank’s deal would help Sprint Nextel Corporation (NYSE:S) lighten its debt burden and simultaneously deploy its LTE network with the cash infusion from the Japanese carrier. Mobile data speed in Japan is twice as much as in the U.S. So, SoftBank has the relevant expertise which could speed up Sprint’s network even faster that Verizon’s and AT&T’s.
Sprint’s new terms with SoftBank gives DISH Network Corp (NASDAQ:DISH) the chance to make the best and final proposal latest by June 18. What’s coming up for DISH?
Will DISH have to look for a new partner?
Sprint Nextel Corporation (NYSE:S) said that its Special Committee and Board of Directors do not consider DISH’s proposal as a ‘superior offer.’ In addition, DISH Network Corp (NASDAQ:DISH) has not made a formal offer yet. Since discussions between DISH and Sprint did not mature and meanwhile SoftBank improved the proposal terms, the Committee decided to end further discussion with DISH.
On the other hand, DISH continues to say ‘that Sprint has tremendous value.’ While Sprint Nextel Corporation (NYSE:S) complains DISH never made an actionable proposal, the satellite TV provider says that it gave all the required information pertaining to the deal. DISH has its last chance to make a final offer to Sprint by June 18. The company is putting in effort to break into the telecom world. In addition to making a counterbid for Sprint, DISH has also made a counter offer to Clearwire Corporation (NASDAQ:CLWR). It recently again outbid Sprint’s increased proposal of $3.40 a share by offering $4.40 a share.
Clearwire Corporation (NASDAQ:CLWR)’s fate is still in doubt. SoftBank needs the regional carrier’s spectrum to build a robust LTE network and to have greater synergies with Sprint. DISH Network Corp (NASDAQ:DISH), on the other hand, wishes to partner with an existing wireless company to enter the telecom space and bundle its pay TV offerings with wireless services. So, where DISH is headed remains unclear. If no deal works out, DISH might as well target T-Mobile. Or as earlier pointed out by Chairman Charlie Ergen, will it put up its wireless spectrum for sale?
The bottom line
SoftBank is inching closer to Sprint, while DISH’s wish to acquire Sprint in this bidding war is fading away. The deal is expected to close in the first half of July. Sprint has suffered for years but the carrier has great potential if its position is nurtured with SoftBank’s expertise, professionalism, and knowledge in this arena. With over 55 million subscribers and majority stake in the spectrum rich carrier, Sprint gives SoftBank ideal conditions to build a stronger telecom player to fight the big two.
Rajesh Marwah has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Rajesh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article SoftBank Inches Closer to Sprint, What About DISH? originally appeared on Fool.com and is written by Rajesh Marwah.
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