Dish Launches a Bid To Acquire SprintDish Launches a Bid To Acquire Sprint

In the near term, Sprint could be facing some turbulence, which it really doesn't need right now.

It looks like everyone wants a piece of the wireless action. Dish Network, the satellite TV company controlled by billionaire Charlie Ergen, has made an unsolicited bid to acquire Sprint, the third largest US cellular operator, for $25.5 billion. The offer consists of $8.2 billion in stock and $17.3 billion in cash.

If you've been following the space you'll know that SoftBank, Japan's second largest cellular provider, had bid $20 billion to acquire 70% of Sprint last October. With investors thinking a bidding war may be underway, Sprint's stock, which had been trading around $6, has jumped to $7.33. Sprint announced this morning that its board of directors would evaluate the bid.

The 60-year old chairman Mr. Ergen co-founded Dish (formerly called EchoStar Communications Corp.) with his wife Cantey and friend Jim DeFranco in 1980, and started out selling satellite dishes door to door in Colorado. Coincidentally, his father was a nuclear physicist at the Oak Ridge National Laboratory and is credited with coining the term the "China Syndrome."

Even with its hilarious Hopper commercials, Dish's satellite technology does not offer a good alternative to terrestrial wired or wireless networks. While it is fine for delivering one-way broadcast services, the long propagation delay (250 msec one-way)--together with the added expense of a transmitter using geosynchronous satellite technology--simply doesn't have the potential to challenge the cable or fiber-to-the-home alternatives for Internet or voice services. So Mr. Ergen is looking to reduce Dish's reliance on satellite technology and transform the company into a real player in the wireless space.

Something of a swashbuckler, Mr. Ergen has already tried to disrupt Sprint's plan to acquire the balance of Clearwire that had been announced last December. Sprint currently holds a 50.45% share in Clearwire and was offering $2.2 billion or $2.97 a share for the rest. Dish bid $3.30 a share but was facing an uphill battle because Clearwire had already agreed to accept financing from Sprint. So it looks now Dish's strategy has morphed into "buy the whole enchilada."

It was also disclosed that Dish had informally approached Deutsche Telecom about acquiring that carrier's T-Mobile subsidiary, which in turn is in the midst of acquiring Metro PCS. Last week Deutsche Telecom sweetened the terms of its offer to get reluctant Metro PCS investors to agree to the T-Mobile acquisition.

Dish's stock has been on a steady climb since 2009, when it was trading for around $10 per share; its high for today is over $37. In preparation for a move like today's, Dish has accumulated $10 billion in cash, partly by selling bonds--giving it a war chest to fund its wireless expansion.

There have been no shortage of big egos in wireless, from Craig McCaw to Steve Jobs, and Charlie Ergen seems ready to join the fray. Sprint has been moving forward based on the influx of financing from the SoftBank deal, so we will have to see how the Dish offer impacts that.

My bet is that the Sprint-SoftBank combination will go through, if for no other reason than Sprint's chairman Dan Hesse has been close to SoftBank's chairman Masayoshi Son since Hesse headed up free-space-optical company Terabeam Networks, in which SoftBank had been an investor. In the near term, Sprint could be facing some turbulence, which it really doesn't need right now.

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