Bidding War for Sprint

Sprint, America’s number three wireless carrier is in the middle of a bidding war for 70% of their corporation.

In October last year Japanese company SoftBank announced that it was lodging a 20.1 billion dollar bid to buy a 70% stake in Sprint Nextel, with the intention post-sale that Sprint would remain a separate entity within SoftBank.

Sprint agreed on the sale, and the deal was expected to be finalized in the second quarter of this year. Unexpectedly jumping in on the deal and essentially starting a bidding war is Dish Network Coorporation ( America’s second biggest satellite TV provider).

On April 15th, Dish offered a counter bid of 25.5 Billion Dollars. So… more money pretty much always wins, right?

Not always. In this particular situation, the choice is made more complicated by the future intentions of both SoftBank and Dish- what can they offer Sprint apart from the original bid price?

SoftBank, a Tokyo based company, has advised investors since the opposing Dish bid that they have the intention- and the ability – to ensure Sprint $3 billion in annual operating savings by 2017.  They have also advised that once merged, the companies will be able to cut Sprint’s capital spending by 32 percent to 36 percent.

Dish’s bid is attractive because of the size of it- a few extra billion dollars does go a long way. Dish posted their first quarter revenue results recently and it showed what seems to be a slowing market- which means that Dish is super keen to use Sprint to expand into the mobile phone industry.

Dish would also want the two companies to merge their marketing and other business teams in order to save money, purportedly around 11 billion dollars, but according to sources familiar with the proposed deal there are those at Sprint who are uncomfortable with this, and unsure of Dish’s ability to guarantee financing for the 9 billion dollars it needs to secure the bid.

Both Dish and SoftBank have come out fighting, with SoftBank going so far as to try to force investment banks not to finance Dish’s bid, threatening no role in the upcoming IPO of Alibaba, a company of which they have one third ownership.

Whoever they go with, Sprint is looking to return to profitability after it’s 2005, 36 Billion dollar purchase of Nextel communications which led to billions of dollars of debt. The extra bid from Dish has excited investors with a rise in Sprint’s share prices by 1.4 percent, and there are many who are expecting the bidding war to rage on way into the second quarter.

We’ll keep you up to date with whoever has the winning bid- and what that means for you if you are a sprint customer ( We’re cautiously predicting only good things btw).

Image courtesy of Forbes.