I’ve been puzzling over what Dish’s endgame here is with its surprise competing bid for clwr, and I think the murky waters are starting to clarify, if by no other means than the process of elimination.
A Dish acquisition of Clearwire might be feasible in theory, but they must know they can’t win this auction unless Sprint wants them to win. After all, Sprint owns more than half of the voting shares, and even if they withdrew their bid they could still torpedo that of Dish and just fund them a while longer.
And a Dish acquisition of mere spectrum from Clearwire doesn’t add up either. To put it simply, it would leave Dish with yet more of what it already has (raw spectrum) and none of what it would need to enter the business (like, a network). So they’re going to spend a few billion for extra spectrum *before* they have even put their own holdings to work?
Some have even suggested that they’re looking to get merged into the whole, but bringing Dish’s spectrum and that of Sprint/Clearwire under a single umbrella also looks a bit unwieldy, as the added spectrum would just make the others scream louder about too much of it in a single pair of hands and gain even tougher regulatory scrutiny. Quite simply, Sprint and Clearwire have enough between them and adding Dish wouldn’t improve anything.
Unless of course you don’t actually merge them. I think that what Dish wants is for Clearwire to remain an independent wholesale force, with them owning a piece of it in partnership with Softbank/Sprint, selling capacity to their owners and probably also to others. There are some points in favor of such a conclusion to this soap opera.
Softbank faces some regulatory scrutiny in taking out both Sprint and Clearwire, with the early flash points being too much spectrum in one basket and the fact that it’s a foreign basket. So why not dilute both problems through a partial, 50% stake for Dish? The spectrum holdings then remain distinct, and the specter of foreign control is substantially lessened.
The two companies could then jointly fund the buildout of the LTE network, giving Clearwire a way forward that is easier on Sprint’s books. Both companies could then use Clearwire’s vast potential data capacity to supplement their own networks. Dish would presumably build out a network using its own spectrum of course – but without needing to hit everywhere at once since it has Clearwire’s to back it up.
But it’s going to be hard to reach such a deal. Softbank understandably wants it all under their thumb in order to have full control over the transformation it is planning. And Sprint’s had enough of this dual 4G personality thing by now, I should think. If those two can still pull the deal as is, they’re sure to do so. But what Dish is trying to do with this bid is not to torpedo it, but horn in on the fun and join it in a giant wireless ménages à trois.
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Categories: Mergers and Acquisitions · Wireless
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Lets think differently about this. What if DISH wants Sprint’s wireline business? I just can’t stop thinking this is an addition by subtraction action – push for spectrum but through compromise get what they want which is wireline business? Clearly Sprint wants Clearwire. They won’t give up easily. But its also clear they may have to give up something to satisfy regulatory desires. Its also clear that Sprint is deep fiber assets supporting its wireline business. If they get the wireline business and thus presumably the last mile assets it better positions access to DISH’s end game of content subscribers.
If there’s any truth to anything we’ve heard its possible DISH is exploring all avenues of content distribution other than just spectrum and satellite. So i’d not be surprised if during his pursuit of spectrum he does a deal with the likes of a carrier for additional distribution of content vehicles.
As i said in a previous post I know there will be people who will immediately jump on this as ridiculous but fiber optic links are best known for their consistent performance as VZ FIOS recently ranked highest customer satisfaction for performance of content delivered. Fiber is immune to EMI/RFI, including solar- and space-sourced interference, which can be a real problem over long distances. On the flip side fiber networks take a lot of work to install and maintain.
But Sprint’s fiber is not FTTH like FIOS but rather it’s mostly backbone and wholesale/enterprise with a heavier than average voice focus. For that matter it’s mostly old and hard to upgrade, which is why Sprint has been loathe to spend much on it. It’s very hard for me to imagine Dish taking this route into the wireline business.
Good point. I guess I assumed that the legacy and deprecated wireline that has antiquated infrastructure would not be the sweet spot but I do believe that it could be an onramp / offramp for customer access positioning them for future growth. BTW, if one manages for margin, harvests and exits certain segments like unprofitable TDM voice services and replace those with converged triple packetized services you might have a decent engine to fuel future growth. Regardless i think the road is hard and complex even if they go down this path assuming they can stop the clearwire momentum.
With Clwr’s working spectrum capacity at four times Ergen’s new found arsenal from converting satellite to cellular as well as Clwr’s “customer base” which needs to be valued, those $8-10 price per share numbers being bandied about by Crest Financial and Mount Kellett might not be as far off as this board’s GOLDMAN STOOGE, Enron Blowhard, has stated during his usual attempts to dis me.
At the same time, Rob, I like your strategy thinking on some combined effort taking place between Messrs. Ergen and Tzu. If this is true, one can see a beheading that is going to take place in the name of Dan The Huckster Hesse. He will deserve it for the ways and manners he was attempting to throw Clwr under the bus!
Ergen was rumored to have made the trek back East during the past few weeks.
http://dealbook.nytimes.com/2013/01/09/dishs-potemkin-offer-for-clearwire/?partner=yahoofinance
With the Clearwire shareholder vote months away, there’s plenty of time for Dish to make trouble. The company is sitting on 40 megahertz of spectrum it bought from two bankrupt firms. It’s probably worth three times the $3 billion Dish paid, after regulators allowed it to be repurposed from satellite use to cellular. That means Mr. Ergen could now be a seller and might explain why he’s positioning himself as a spoiler with Sprint. Until he explains himself, deal watchers will have to consult Sun Tzu instead.
Clwr’s stock price seems to be getting a little bit perky today, and I keep wondering when Direct T.V. might be entering this bidding war foray?
Not sure if dtv will come to the party but I do think dish is in play to get acquired. Earlier this year a Citigroup analyst by the name Jason Bazinet pointed out in a research note the satellite television service provider Dish is likely to eventually be acquired either by AT&T. The working theory is that AT&T would like to own the spectrum Dish has piled up; another theory is that there would be significant synergies from a Dish/DirectTV deal, and that the video market is now a lot more competitive than when the government rejected an attempt to merge the two satellite TV companies back in 2001. Synergies could be as high as 3B.