Dan Hesse

More money for Sprint, a potential life-saver for DISH

Early Monday morning, satellite TV innovator DISH Network threw a monkeywrench into Softbank’s plans to acquire a 70 percent interest in Sprint. It did so by offering a 13 percent premium over Softbank’s bid, and rather than buy a majority of Sprint, DISH is proposing a full merger.

For those of you who really want to understand the thinking that went into this, watch the AllThingsD video interview with DISH chairman Charlie Ergen. It’s a long video, but damn, you have to admire the straight-up answers Ergen gives to the audience. 

My take on the whole thing is pretty simple.  DISH Network is part of the old world, just like cable TV, except that it has no easy way to deliver broadband access. Cable companies, at least, have DOCSIS networks. So even if the whole planet starts to cut the cord and adopt an over-the-top Internet TV model, cable companies can still get paid for the plumbing.  Satellite? Not so much. Without adapting a new business model, these guys are dying a slow death.

DISH has been very clear about its desire to own a wireless network. But it's also acknowledged the difficulty in building out such a network without a customer base to help finance it. A partnership has always been something that made more sense to DISH, based on all the public commentary. 

DISH even bid $5.15 billion for Clearwire about 3 months ago. But Sprint had already bid for the 49 percent of Clearwire that it didn’t own, and being the majority shareholder, it was seen as unlikely that DISH’s bid would matter at the end of the day.

So what’s a satellite guy to do? Go big or go home. Step up the bid and make a play for the entirety of Sprint.  Assuming the Clearwire acquisition by Sprint closes, DISH would end up with a Dan Hessemonumentally huge spectrum asset as well as a huge customer base on which to justify an incredible LTE build out.

We all know that the future of TV is over the top. And we all know that mobile data is being used more and more to watch video. If DISH owns Sprint it can conceivably get creative in how it charges its customers for access to video. While most wireless providers are charging a hefty premium for high bandwidth plans (to accommodate video), I imagine DISH would be able to offer unlimited streaming of its programming to mobile devices provided that those devices were connected via Wi-Fi or Sprint’s network. 

Sprint and DISH, together, would have about 70 million customers, minus whatever portion of DISH’s existing 14 million subscribers are also shared with Sprint. So the scale they could achieve, together, is significant. By comparison, Netflix has about 27 million streaming customers in the United States.

That said, Netflix has a very different model.  There are no channels on Netflix.  There is just programming. There is no concept of live TV at all. And the price is right at $7.99 per month. Today’s kids are not growing up as subscribers to Pay TV such as DISH or Cable TV. So the old world video guys need to change their model. 

Yet Netflix (and Amazon, and Hulu and others) do not have access to live sports or news. The over the top video model is not complete.  Neither the new-world streaming players nor the old-world cable and Satellite guys have a full solution.  They’ll both likely fight to migrate towards a complete model.

Unless Softbank raises its bid, or someone else comes into the game, I think the DISH bid for Sprint will succeed. It is a very logical business combination. And it could shake up the TV market in a good way. It could make Sprint far more relevant in the wireless game. It could force other wireless players to reduce bandwidth restrictions to maintain a competitive stance.  It will likely spur more partnerships or acquisitions. 

Overall, I think this is good news for U.S. consumers -- and that includes mobile users. Things are about to get very, very interesting.

 

Reader comments

DISH's bid for Sprint is a good one all around

32 Comments

This will be very interesting to see how it plays out in the coming years, I'm all for a change up in the wireless game!

Your comparisons do not make any sense. AOL was an overvalued company, they did not have the worth they reported, much like Facebook. Dish is a solid company, not to mention Dish is not virtual. Nothing better than an American company merging with an American company, Dish and Sprint merging is a great idea.

I've been with dish for well over 10 years. I've also been with Sprint over ten years, since back when they were cellular one.  I'm looking forward to see how this pans out.

Sprint was never Cell One.. and Cell One is now part of ATT Wireless.

Sprint started from ground up.. Sprint originally had a GSM network (Sprint Spectrum), which they spun off and is now called T-Mobile; opting to go CDMA like Verizon.

This deal is only good for people with Sprint stock. Softbank wants to grow and is looking to grow.

Things are about to get interesting in the mobile arena.

EDIT: I had to use my laptop to make a comment, because the moderators want to moderate all of my comments posted with my GNex, even though my comments are clean.

^ This. Dish is very desperate. They know they are losing the satellite game, which is all they have. They also overspent billions on spectrum that they have no need for and will never recoup the cost spent on it. They also bought Blockbuster which as been a disaster as they are bleeding money and Dish now owns hundreds of retail buildings that serve no purpose since video renting is dead. If this merger fails I expect to see Dish either eventually die out, merge with DirecTV or go all out in paying off the government to build a wireless network that will fail.

I doubt they own many. Most are probably leased so they just have to wait out the agreements...ie keep paying rent until they can walk away. It sucks either way but owning buildings no one wants would be worse.

I said that several times, even Emailed AC to ask if there is a conspiracy or something. It obviously had no effect.

This is the best deal for Sprint for now and the future. For one, it gives Sprint-Dish the most spectrum in the US, side note - this is a quest for spectrum supremacy. It also could open the combined company to business similar to FIOS and U-verse. Also don't forget Dish has a very friendly relationship with Google. That relationship could open the door with Google fiber down the line. Just image it. The only thing that would concerns me about this deal would be the possibility Dish slows down the LTE roll out because they don't have the capital or know how.

Also Sprint has a good relationship with google too. I think that good thing are going to come out of this

LTE rollout will be unphased. They have the capital for it already. It's paid for, just rolling it out takes time to install stuff, deal with contractors and more importantly, deal with local municipalities to have the right to work on the towers. This was covered ad naseum when the Softbank thing was announced.

Good for everyone but employees and the local KC economy that is. It will most likely lead to many job losses for the area where I live. Here is an article from the KC Star that is raising some alarm: http://bit.ly/17gNBbF

With Softbank, Sprint has more leverage on the mobile industry. With Dish, it can provide more content. Sprint owning Clearwire gives them all the future bandwidth / spectrum they need.

There are two things Sprint needs to compete. First is spectrum. They actually have sufficient spectrum for now. Admittedly Dish has some preferred spectrum in the lower frequencies, but Sprint is also freeing theirs up with the decommissioning of iDEN. So the spectrum argument isn't as strong as you might think. The second thing they need is capital to do the build out and that will not be cheap. Can Dish provide that? This has nothing to do with stock price or the size of the offer. Who is in a better position to provide working capital; Softbank or Dish? Ultimately, this is the question that determines which is best for Sprint and it's customers. Too bad too much importance will be placed on stock price.

While I typically enjoy editorials I feel this one missed the mark. As richardodn said, who is in the better position to provide Sprint with the capital (immediate cash and resources) to continually expand and improve their network. The answer? NOT Dish network. Dish is a company without a direction. They are barely #2 in a two company race for satellite television. Their long-term debt burden is huge, their customer service is awful and they have made a number of losing bets recently that will simply take away from their bottom line in the future. This has the potential to be bad on the levels of the Worldcom + Sprint merger proposed over a decade ago. I see no positives relating to customers at all, only stockholders.

Sprint shareholders aren't going to care if Softbank has more cash to inject in the business.  Yes, they do.  But DISH is also well capitalized, and is offering more.  Sprint shareholders are going to go for the cash that hits their pockets, not Sprint's.

As a Sprint shareholder myself, this was the angle I looked at.  

I do think the softbank deal will help sprint on building a better network. But Dish's bid would only bring maybe cheaper prices with bundled services being the primary focus & Network improvement secondary. I think it all depends who you are in this deal and what you want out of it for it to be good for you.

For the few who are saying Dish does not have the "capital", can either of you please list the financials of Dish? Or how about Softbank?! As a customer of Sprint and Dish, I can honestly say that I am satisfied with the services. From what I've been reading about Softbank, they treat foreign customers (poorly) differently than their domestic customers. Softbank has very questionable business practices.

Dish buying Sprint would cause a loss of a lot of jobs. Dish has a bad habit of buying a company and then laying off people. Sprint would suffer and so would all its customers.

@rendonred

The Dish proposal is a merger, Softbank wants a majority stake in Sprint. The history of foreign investments have stripped the assets of American companies. Like many other foreign investments Softbank will undoubtedly ship jobs overseas. It doesn't help the economy.

@oneAwake

Dish has used the term merger before but if you look at the terms of the merger you see that it is a buyout also. It will cost jobs and Dish already out sources its call centers so I really don't see how its a win for anyone but Dish's CEO.

I'd much rather see this Dish / Sprint merger. I'm a customer of both and have been for a long time. Not that I expect to see anything happen in the short term, I'd rather keep the investments in the US. That's why I buy domestic cars, drink local beer and buy American when I possibly can (which is virtually impossible). Long Live DINT! or SPRISH!

PS. Not sure why people say that DirecTV is killing Dish. Because they have better commercials? Doubtful. Look at earnings sheets. Dish is going along just fine.

If Dish & Sprint merger, their spectrum would be larger then AT&T and Verizon. With a well built and capable 4G network, unlimited data and video content, this will all but force competition to offer unlimited data again. This is what I'm hoping for.

Wow Chris! You described everything that would be good for Dish and it's current customers, however, you failed to give the "Sprint mobile customer" any good news here. Analyst or not, you obviously have no concept of what this evil marriage would do to the mobile side of things. Charlie's real plan here is to literally suck the remaining life out of Sprint....all he wants is the spectrum and couldn't give two shits about the current cell customers. Sprint's network will decline much further under Dish as the new focus will be completely on building out a wireless broadband network for streaming purposes and that only. The moile voice and data side will be left in the dust to rot. Let's also consider the fact that after a merger is completed between Dish and Sprint that the "new" company will be completely tapped out....meaning there will be little to no new cash to build out any kind of network.... So, what's the point here, why? The answer is that Charlie is a known conceded megalomaniac whom doesn't like to loose which will ultimately be his unmaking as well as Dish and definitely Sprint. Also, Dish will have to come up with 4 billion dollars to pay Softcell for breach of contract as per the Wall Street Journal. That just might break Dish's bank.....

I'm pretty leery of any company that overcharges so much for their services (Dish) buying another company that overcharges for its services (Sprint). That's like Scrooge McDuck marrying Mr. Burns.

Dish is the same network that cut off certain channels to its customers because it was unable to get paid enough to show them.

While I don't like the idea of a Chinese company having controlling stake in Sprint, at least Softbank has gotten as big as it has by undercutting the competition, and offering much more value for your dollar (that's how they got massive in China).

I'd much rather see a company that has a history of treating customers well purchase/merge with Sprint. But, Sprint desperately needs more spectrum. Maybe this would be a good place for Dish to dump spectrum to stay afloat longer?

The Softbank Acquisition is really the best choice for Sprint.

Softbank will expand and shake up the wireless game far more than DISH would or possibly could.

Softbank isnt looking to fire or lay off staff in sprint theyre looking to expand in to the US Market and create more jobs, on top of that they'd be bringing an entire host of technology with them creating a new TD LTE Network with speeds faster than your home internet.

So if you say that a DISH/Sprint deal is better than a Softbank/Sprint deal then you're just misinformed.

They could just make an app that provides everything their satellites provide and charge monthly for that. Integrate with Smart TVs and Blu-ray players too. You know...like Netflix does.

No need to buy a carrier.