Will Sprint Side With Strategy?

Includes: DISH, S, SFTBF
by: 451 Research: Inorganic Growth

By Ben Kolada

DISH Network's (NASDAQ:DISH) $25.5 billion offer for Sprint Nextel (NYSE:S) represents a 13% premium to SoftBank's (OTCPK:SFTBF) October bid, but its lack of mobile experience may ultimately cause the company to lose the deal. Stock plays a major component of both transactions (32% for DISH vs. 30% for SoftBank), meaning the future value of either deal will be dependent on which company -- SoftBank or DISH -- will be able to better execute in the mobile market. Arguably, the answer is SoftBank.

Without a doubt, SoftBank understands the mobile market, and therefore would understand Sprint's business more than DISH. Mobile is an entirely new arena for DISH. SoftBank, on the other hand, generated some $22 billion in mobile revenue alone last year. To put that in perspective, that's nearly double the total revenue DISH generated over the same period. Meanwhile, we'd also point out that DISH's investors already have doubts about the deal. Following the announcement, the company's shares fell more than 5% throughout the day, although they did recoup some of the losses by midday.

Although Sprint hasn't yet provided an official response to the DISH bid, we expect that it will staunchly defend itself against DISH -- much like it is defending Clearwire (CLWR) against a DISH takeover.

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