Ergen says Dish must prevail in bidding war for Sprint
(Reuters) - Acquiring Sprint Nextel is so important to Dish Network Corp that founder Charlie Ergen said he could consider selling the company altogether if he loses a bidding war with SoftBank Corp.
Ergen also proposed a number of other possible outcomes on Dish's quarterly conference call where he fought back against SoftBank founder Masayoshi Son's criticisms of the Dish bid.
The executive said he could take on a bidding partner or sell some non-core Dish assets to pay down debt if a bidding war with SoftBank becomes too pricey. Dish made a $25.5 billion counter bid last month for Sprint against SoftBank's October agreement to pay $20.1 billion for 70 percent of Sprint.
"If we're unsuccessful with Sprint, obviously we have a lot of options." Ergen said. "It could include selling spectrum. It could include selling the whole company. It could include partnering with somebody else in the wireless business."
However the billionaire maverick who has a reputation for tough deal-making said that above all else, he wants to buy Sprint, the No. 3 U.S. mobile service provider.
"Our preference is Sprint. That's our focus," he told analysts and reporters on the conference call.
Dish wants to expand into wireless services as growth is slowing in its satellite TV business, which faces tough competition from cable, telecom and Internet video providers as well as satellite TV rival DirecTV.
So a combination of Dish with DirecTV, would be much less attractive than a Sprint deal, Ergen told analysts in response to a question about the possibility of a DirecTV deal.
"While there would be a lot of synergy and it would be bigger, it would be the same company," Ergen said adding that such a company would eventually need to be transformed "because the video business is mature and ultimately will go into decline."
Ergen did not say who could partner with Dish if it needed more financing than it could raise alone to win Sprint.
If it loses Sprint, Dish could partner with another operator such as No. 4 U.S. mobile service provider T-Mobile US to help develop its wireless service.
But Ergen said Sprint would be a much better option than T-Mobile US because of its size and the amount of spectrum Sprint owns through its majority owned venture Clearwire Corp.
In response to Son's warning to Sprint shareholders that a Dish deal would load down Sprint with too much debt, Ergen argued that he could reduce debt leverage in a few years or even sell assets if it needed to pay back debt sooner.
Another criticism about Dish's bid for Sprint was the fact that it has not yet made a firm commitment to raise the $9.3 billion financing it needs to buy Sprint, which formed a special committee of independent directors to review the Dish offer.
After telling analysts that Sprint has not yet let Dish look at its books, Ergen vowed to make a firm financing commitment only when it is the last obstacle preventing him from gaining access to Sprint's books.
"The firm commitment does have a cost to us," Ergen said adding that he doesn't want to incur those costs unless Sprint is seriously considering his bid. "Our bid is contingent on the fact that we get to do due diligence."
Janco Partners analyst Gerard Hallaren said Ergen's comments "puts pressure on the special committee to explain its view."
"Like many, we believe Dish has made a superior offer for Sprint than has SoftBank. The risk is that Sprint's board will favor an offer that preserve's at least some of their positions even if it jeopardizes shareholder wealth," Hallaren said.
Wunderlich Securities analyst Matthew Harrigan saw Ergen's laying out of all his options as the strongest indicator so far of the extent of his determination to buy Sprint.
"It certain seems like both sides feel it's a huge strategic priority this deal gets done," Harrigan said.
The conference call came after Dish reported its quarterly earnings. In the first quarter, it added a net 36,000 subscribers, down from 104,000 a year earlier. Analysts had expected 68,000, according to StreetAccount.
Net profit fell to $215.6 million, or 47 cents per share, in the first-quarter from $360.3 million, or 80 cents per share, a year earlier.
Revenue dropped marginally to $3.56 billion, mainly due to a weak performance of its Blockbuster video rental business, which Dish bought in a bankruptcy auction in 2011.
Blockbuster revenue fell 46 percent to $180.3 million, mainly because Dish sold the British unit of the video rental company to private equity firm Gordon Brothers Europe.
Analysts on average had expected earnings of 53 cents per share on revenue of $3.61 billion, according to Thomson Reuters I/B/E/S.
Shares of the Englewood, Colorado-based company closed down 81 cents or 2 percent at $38.80 on Nasdaq.
(Reporting By Sinead Carew and Liana B. Baker. Additional reporting by Lehar Maan in Bangalore; Editing by Don Sebastian and Chris Reese)