Charlie Ergen's Dish Network (NASDAQ: DISH) could use some financial help in its attempt to take over Sprint Nextel (NYSE:S), and BTIG Research analyst Walter Piecyk is suggesting two white knights that could come to Dish's aid: Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG).
"If Ergen were to add a strategic cash player into the mix, he could be positioned to leave a lasting mark on the industry. Google or Apple might want to step up before someone derails Ergen's plans," wrote Piecyk in a blog entry.
A special committee of Sprint's board is considering whether Dish's highly leveraged $25.5 billion offer is superior to SoftBank's plan to buy 70 percent of the company for $20.1 billion. Yet Ergen's plans for Sprint may make Dish itself an acquisition target, with AT&T (NYSE:T) likely to consider a Dish takeover as a way to eliminate a potentially disruptive competitor, according to Piecyk.
To forestall such a takeover, Apple or Google should consider partnering with Ergen because the leading mobile operators' policies on wireless data usage caps and speed throttling hinder the kinds of services that can be offered by technology companies and content providers, said Piecyk.
A Dish-Sprint combination bankrolled by Apple or Google has the potential to dramatically alter the competitive landscape for wireless broadband. Dish supporters point to the massive spectrum holdings that a combination of Dish, Sprint and Sprint's partner Clearwire (NASDAQ:CLWR) would have, potentially enabling delivery of unlimited broadband data as well as innovative mobile video services, the likes of which have not been seen before in the U.S. market.
Not only does Dish have important nationwide video content relationships and the Sling functionality to offer that content ubiquitously, it brings to the table an additional 45 MHz of spectrum, including low-band 700 MHz spectrum, that SoftBank does not have. Plus Dish's adjacent spectrum position to Sprint would make the purchase of H-Block PCS 1900 MHz spectrum more valuable to the combined companies, said Piecyk.
The H Block is located between the G Block, which Sprint is using for its 5x5 MHz LTE rollout, and spectrum Dish acquired from TerreStar. Dish has agreed to not use a portion of the TerreStar spectrum to eliminate potential interference with Sprint's network, but those frequencies could be put into use if the two companies coordinated efforts.
The FCC expects to auction the H-Block by January 2014. Piecyk said the H-Block might cost the winning bidder $750 million-$1.5 billion, which would pose a financial challenge to an already leveraged Dish-Sprint unless it were aided by a major cash equity partner.
The ultimate attractiveness of a Dish-Sprint combo to potential partners hinges on Sprint's offer to buy the roughly 50 percent of Clearwire that it does not already own. Verizon Wireless countered that move with an unsolicited offer to purchase Clearwire's spectrum license leases in major markets for up to $1.5 billion. Clearwire has scheduled a shareholder meeting May 21 to vote on Sprint's offer.
For more:
- see this BTIG blog post
- see this Barron's article
- see this The Street article
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