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Why DISH should be negotiating with Clearwire rather than bidding for Sprint

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DISH Network’s bid this week to acquire Sprint Nextel came as a surprise to most –  not least Japan’s SoftBank, which had  agreed last fall to buy a 70 percent stake in the company.

In a presentation explaining his bold vision for the company, DISH’s CEO Charlie Ergen detailed plans to provide seamless mobile access to subscription TV content (based around DISH’s Sling and Hopper technology), and a plan to offer fixed wireless broadband to the estimated 40 million households that lack access to high bandwidth fiber or cable networks. Crucially, the latter would be accomplished using a combination of Clearwire’s 2.5GHz spectrum as well as satellite broadband.

That’s the theory, but in practice commentators have questioned whether the leverage inherent in DISH’s bid – for what is a considerably larger company – will constrain the ability of a merged Sprint/DISH to invest in the Sprint network and implement these plans. Further, many expect that Masayoshi Son, the CEO of SoftBank, will outbid Ergen – despite his protestations to the contrary.  Ergen’s vision for DISH’s future is bold and exciting, but the question ultimately is whether Sprint is crucial to achieving it, and whether it can even work without Clearwire.

Sprint not a requirement for mobile delivery

With respect to the delivery of seamless mobile video, DISH already has most of the necessary technology available. After all, you can already use Sling on your mobile device today. The only real constraint is that the cost of wireless capacity makes it prohibitively expensive to watch mobile video on a metered 4G data plan. If DISH does indeed acquire Sprint, then it could potentially exempt Sling content from any data caps implemented for Sprint subscribers, thereby making seamless usage more feasible (and an attractive marketing point for potential new subscribers).

Nonetheless, there is nothing unique about Sprint’s network that makes it a necessary component to that strategy: DISH could just as easily shop its AWS-4 spectrum to T-Mobile for instance, which could  deliver a similar offering.

Wireless broadband crucial for success

Unlike DISH’s mobile video plans, which are responding to potential longer-term shifts in video consumption, DISH’s ambitions to deliver fixed broadband to the home appear to be far more critical to the near-term competitive position of its satellite TV business. Importantly, the entire plan appears to be predicated on the use of Clearwire’s spectrum for a national deployment. In particular, DISH is at a substantial disadvantage compared to cable and telco TV solutions, which offer integrated broadband and video-on-demand capabilities.

DISH has been attempting to acquire around 40MHz of spectrum from Clearwire since last summer, and it is hard to see where else it could hope to dig up that much spectrum for a fixed wireless broadband network, at a reasonable price – unless DISH uses its own AWS-4 spectrum. However doing so would limit Ergen’s leverage to strike a deal with a wireless operator. Alternatively, DISH could attempt to repurpose LightSquared’s spectrum, but that would be fraught with difficulties.

The greater flexibility DISH has in realizing its mobile video plans vs its fixed broadband ones suggests it may be far more important for it to acquire some of Clearwire’s spectrum than to buy all of Sprint right now. After all, if Deutsche Telekom is willing to strike a deal with DISH after completing its merger with MetroPCS, then Ergen could deploy the 2.5GHz Clearwire spectrum on T-Mobile’s network.

So the question is, might SoftBank agree to sell part of Clearwire’s spectrum to DISH, in exchange for DISH agreeing to withdraw its bid for Sprint? That would certainly be logical, but with two billionaires’ egos at stake, it’s never a given that the most rational outcome will prevail.

Tim Farrar is president of Telecom, Media and Finance Associates, a consulting and research firm in Menlo Park, Calif., which specializes in technical and financial analysis across the satellite and telecom sectors.He blogs on wireless and satellite issues at; follow him on Twitter @TMFAssociates.

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3 Responses to “Why DISH should be negotiating with Clearwire rather than bidding for Sprint”

  1. FarmerBob

    Charlie needs to take care of DISH before he goes out on any more spending sprees. Their hardware has been surpassed. Their software is juvenile and outdated. If he wanted to buy something, the one he really missed was TiVo.

  2. “So the question is, might SoftBank agree to sell part of Clearwire’s spectrum to DISH, in exchange for DISH agreeing to withdraw its bid for Sprint?”

    This whole article is premised on an incorrect presumption and is therefore entirely wrong. DISH cannot purchase or otherwise utilize any Clearwire spectrum without the consent and agreement of Clearwire — and by extension Clearwire’s majority shareholder Sprint.

    Even if both the SoftBank purchase of Sprint shares goes through and the Sprint purchase of the Clearwire shares it still doesn’t own go through, SoftBank cannot make any agreements with DISH regarding any Clearwire spectrum. Only Sprint can then agree to such a transaction. SoftBank, even after its proposed transaction with Sprint goes through, will not own Sprint. It will simply be a majority shares owner of Sprint, which will still be an independent and publicly traded company.

    And there is little reason for DISH or anyone to expect that Sprint will agree to share or sell Clearwire spectrum to DISH so that it could utilize it to compete with Sprint. Especially with the article’s theory of DISH then using Clearwire spectrum in conjunction with Sprint competitor T-Mobile.

    • Not quite. Absent the merger agreement with Sprint, Clearwire is able to sell up to 20% of its assets without Sprint being able to veto the transaction. So if Sprint’s bid fails, and Clearwire remains independent, it would be reasonable to expect Clearwire to sell part of its spectrum either to DISH or to Verizon to raise additional funding. If Clearwire can’t do that, then it will fall into bankruptcy, where DISH will have strong influence over the outcome by virtue of DISH’s substantial investment in Clearwire’s secured debt.

      Sprint’s bid price for Clearwire is also subject to approval by SoftBank, so Sprint cannot raise the $2.97 offer without SoftBank’s agreement. So the question becomes, does SoftBank really want to complete its proposed deal with Sprint and if so, is it prepared to raise its offer for Sprint. So far SoftBank has suggested it does not want to raise its offer for Sprint or allow Sprint to pay more for Clearwire. If money is no object for SoftBank then of course no compromise with DISH is required.

      However, if SoftBank wants to secure a deal with Sprint at the current price, but cannot persuade Sprint shareholders that its offer is superior to DISH’s rival bid, one option would be to persuade DISH to back down and withdraw its bid. Selling part of Clearwire’s spectrum to DISH would obviously need Sprint’s agreement, but if the alternative is losing Clearwire’s spectrum to Verizon, that’s a logical choice to make. After all, DISH doesn’t intend to use the Clearwire spectrum to compete with Sprint in mobility, DISH plans to use this spectrum to deploy a fixed wireless broadband network.

      And if DISH subsequently invests in T-Mobile, does that really stymie Sprint’s ability to merge with T-Mobile in the longer term, given that any proposed Sprint-T-Mobile merger will have to wait until after the next election to get DoJ/FCC approval? And in the meantime, SoftBank is focused on ensuring Sprint can compete more effectively with AT&T and Verizon on service quality, and it certainly doesn’t want to engage in a price war with T-Mobile for less desirable wireless customers.