Dish Network (NASDAQ: DISH) Chairman Charlie Ergen said the company would consider a partnership with Sprint Nextel (NYSE:S), which Dish is challenging with a rival bid for Clearwire (NASDAQ:CLWR).
On Dish's fourth-quarter earnings conference call yesterday, Ergen said he thought Dish's unsolicited $3.30 per share offer for 40 MHz of spectrum and a commercial agreement with Clearwire is "clearly a better deal than what Sprint has offered," which is $2.97 per share for control of the 50 percent of Clearwire it does not already own. Clearwire's board has said it is reviewing the Dish offer but still recommends the one from Sprint.
"If that transaction [Dish's offer to Clearwire] went through, Sprint's your most likely partner," Ergen said, according to a Seeking Alpha transcript. "The reverse of that is, is that, that offer is not accepted or there's a bidding war for Clearwire, right? And were we to lose that bidding war or if we were not to prevail for our offer for Clearwire, then Sprint's probably not a likely partner."
Ergen also said Dish will need to see how the bids play out, and what the regulatory environment is with the FCC. But he said the company has "other options." Still, Ergen said Dish's offer would be good for Sprint and Clearwire and that "we're playing to win."
Financial analysts have said that Dish's bid is unlikely to succeed. However, Dish's bid, along with pressure from Clearwire's minority shareholders, could motivate Sprint to raise the value of its final offer for Clearwire.
Dish wants to acquire Clearwire spectrum covering approximately 11.4 billion MHz-POPs, which is approximately 24 percent of Clearwire's total spectrum holdings, for $2.2 billion. As part of the deal, Clearwire could sell or lease an additional 2 MHz of its spectrum to Dish and it could also provide certain services such as network management, construction and maintenance for a network in the AWS-4 spectrum.
Ergen said Dish hopes to get its licenses for its AWS-4 spectrum next month and move quickly through 3GPP certification for changes to its band plan. While he reiterated that Dish wants a wireless partner to help it build out its proposed LTE Advanced network, he said Dish will take practical steps to get its wireless buildout moving.
"And at that point in time we'll start building," he said, speaking of the completion of the 3GPP process. "We're already building chipsets, and we'll start building radio, so that we can start testing our system. And we hope to be able to test something by late this year. We're also building out our 700 MHz license. We're in the process of testing that as well, and we'll add more sites to do that. We won't spend a huge amount of money in doing that, but we'll at least make sure that all our technology works."
Ergen said Dish wants to use its spectrum to deliver mobile video. "So we think we're well positioned there, and we think that we have assets to make that product better for somebody out there that wants to partner," he said. Later, Ergen added that Dish's wireless service "would have to be better and has to be less expensive" to compete with existing offerings.
Dish must cover at least 40 percent of the population in areas covered by its spectrum with a wireless network in the next four years, or face penalties. Further, the FCC said Dish must cover at least 70 percent of that population within seven years.
If Dish--or a future licensee of the AWS-4 spectrum--fails to hit the 40 percent mark in four years, it must hit the 70 percent coverage threshold in six, rather than seven years. Further, if Dish fails to hit the 70 percent mark in any economic area as defined by the FCC, it will automatically lose its right to deploy service there.
- see this Seeking Alpha transcript
- see this WSJ article (sub. req.)
- see this Reuters article
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