Dish and its ICT competitors
According to Forbes, with rivals Comcast Corporation (NASDAQ:CMCSA), Time Warner Inc. (NYSE:TWX), Cablevision Systems Corporation (NYSE:CVC), and Charter Communications, Inc. (NASDAQ:CHTR) currently offering their customers phone, internet, and TV services, Dish seems to be playing catch-up in its bid to acquire Sprint Nextel Corporation (NYSE:S). Competitors are busy expanding their services; for example, AT&T Inc. (NYSE:T) is offering ‘Connected Home’ services and has partnered with General Motors Company (NYSE:GM) to bring LTE internet connectivity to automobiles. Verizon Communications Inc. (NYSE:VZ) is also offering connected home features and is working on LTE vehicle connectivity with BMW, Honda, and other automakers.
A few negative aspects exist in a potential Dish/Sprint Nextel Corporation (NYSE:S) deal – a merger financed with debt means the combined company could end up with total debt on the books in excess of $46 billion. Dish may be placed at a disadvantage due to Sprint’s lagging LTE options, which won’t be deployable until 2014, while rivals Comcast Corporation (NASDAQ:CMCSA) and Time Warner Inc. (NYSE:TWX) have already teamed with Verizon Communications Inc. (NYSE:VZ) in a similar capacity. Dish’s EPS may also get dragged down by Sprint Nextel Corporation (NYSE:S)’s EPS, which is not expected to be positive until 2014. These factors can have a long-term negative impact and adversely affect share prices.
Softbank’s offer
Meanwhile, Japanese wireless provider Softbank’s $20.1 billion offer, made last October, would give Softbank a 70% stake in Sprint Nextel Corporation (NYSE:S). The offer also would infuse Sprint Nextel’s balance sheet with $8 billion in new capital. Softbank’s offer provides Sprint shareholders with cash of $4.03 per share and a 30% equity ownership in Sprint Nextel alone. Bloomberg has reported rumors were circulating that an unnamed Softbank insider claimed a higher bid would not be made to counter DISH Network Corp. (NASDAQ:DISH)’s offer.
Impact of merger on growth
According to The Motley Fool, Sprint Nextel Corporation (NYSE:S) shares rose as much as 18% when Dish announced its $25.5 million unsolicited offer, which includes $17.3 billion in cash and $8.2 billion in stock. The satellite provider values the merger’s growth opportunities at $37 billion, which includes cost savings of $11 billon. By providing Sprint shareholders with $7.00 per share, Dish is paying cash of $4.76 per share and providing a 32% equity stake in Dish/Sprint Nextel. The deal gives Sprint shareholders more cash per share and greater equity in the combined company, versus the terms offered by Softbank. The combined company hopes to offer bundled in-home and out-of-home services.
According to the New York Times, and telecom analyst Chetan Sharma, the merger’s goal of sharing the benefits of in-home and out-of-home services is no easy task, and consumers will mostly notice changes at a marketing level. Sharma favors the deal with Softbank, which he feels gives the companies greater negotiating power with the likes of Apple Inc. (NASDAQ:AAPL) and Samsung to obtain cheaper phones and pass cost savings on to consumers.
Changes in wireless services
Satellite Today believes this merger can lead to significant changes within the ICT sector. Dish’s acquisition can help the company get its LTE venture off the ground. Satellite analyst, Maxime Baudry, believes the merger will benefit both companies, and will also bring along Sprint’s partner, Clearwire Corporation (NASDAQ:CLWR), a 4G wireless provider with approximately 130 million U.S. customers.
Baudry believes the deal could result in some novel service offerings that combine Dish’s satellite infrastructure and Sprint Nextel Corporation (NYSE:S)’s LTE technology. According to Barron’s, the three companies will bring together spectrum licenses with a market value of $40 billion, a feat that has not been accomplished before in the wireless industry. Dish CEO, Charlie Ergen, plans to combine the company’s spectrum licenses with Sprint and Clearwire Corporation (NASDAQ:CLWR)’s wireless networks, enabling Dish customers to access television content on tablets and smartphones. This move can help Dish and Sprint compete more effectively with rivals AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ).
Conclusion
A DISH Network Corp. (NASDAQ:DISH) and Sprint Nextel Corporation (NYSE:S) merger will benefit investors by positioning the combined company to attract new customers through bundled satellite TV and mobile services. Sprint will also have the opportunity to stand out in the market by utilizing Dish’s expertise with video and movie content. Consumers and investors benefit if DISH Network Corp. (NASDAQ:DISH) wins since the merger will bring new services at better prices, which should favorably impact Dish and Sprint’s share prices.
The article The Battle Over Sprint Nextel originally appeared on Fool.com.
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