By Mari Saito, Tim Kelly and Sinead Carew
TOKYO/NEW YORK, April 16 Masayoshi Son,
billionaire founder of Japanese mobile carrier SoftBank Corp
, is expected to stay in the battle for U.S. wireless
service provider Sprint Nextel Corp, even though he could
profit handsomely by walking away.
While the intentions of Charlie Ergen, the chairman of Dish
Network Corp, should be clear - after a bold $25.5
billion counterbid for Sprint - not everyone is convinced the
deal will go through.
Son, a rare risk taker in Japan's conservative corporate
culture, is likely to put his ambitions to create a global
company ahead of quick financial gains, analysts in Asia said on
Tuesday. Sprint would give SoftBank a U.S. toehold.
But Ergen's dealmaking history and poker-player past, have
led some in the United States to question the intentions of the
executive, who in January countered Sprint's bid for control of
another U.S. wireless service provider, Clearwire Corp
with a higher offer. He said on Monday he would honor Sprint's
bid and had not formally withdrawn his bid.
"(Ergen) plays a multi-hand approach to the world," said
Chris Gleason, a managing partner at Taran Asset Management,
which owns shares in Clearwire and options to buy Dish shares,
adding, "it's not 100 percent clear yet what he wants."
Gleason, who still holds out hope for a Clearwire deal with
Dish, said Ergen could be making "a play to rattle the
Macquarie analyst Amy Yong said that while Dish appears to
be serious about its offer for Sprint, his pursuit of the No. 3
U.S. carrier could help present Ergen with other options if
SoftBank ends up winning the battle.
"It gives him a seat at the table to discuss to discuss his
pay-TV business, his spectrum and financial flexibility with a
number of companies," Yong said of Ergen.
The Dish offer, Yong said, could lead to talks between Dish
and companies ranging from satellite TV rival DirecTV to
wireless providers AT&T Inc and a combined T-Mobile USA
and MetroPCS, which plan to merge with each other.
One communications industry banker said that while Ergen's
offer seems solid, he could change his mind.
"He's always playing options. He changes his mind a lot,"
said the banker, who is not involved in the Dish deal, but has
worked on past deals where Ergen was involved, and asked not to
be named due to a lack of authorization to speak to the media.
Another source, this one from the industry who does business
with Sprint questioned if Dish would have the expertise to run a
"Just because they have the money does not mean that they
know how to manage a large carrier, especially when Sprint has a
major network upgrade going on," said the person, who asked not
to be named.
Dish has made no announcement about the management of the
new company, because it is in the early stages of trying to get
the deal together, Dish spokesman Bob Toevs said. But Toevs
dismissed any suggestion Dish's intentions were other than those
"I don't think you could characterize our proposal as
anything but serious given the vision we've outlined and the
resources we've marshalled to make that vision a reality," he
The Dish bid follows SoftBank's October proposal to buy 70
percent of Sprint for $20.1 billion and is roughly a 13 percent
premium to the Softbank bid according to Dish
Dish outlined plans to combine its TV service with Sprint's
wireless network in an attack on rivals including Verizon
Wireless and AT&T.
SoftBank said its proposal would offer Sprint shareholders
"superior short and long term benefits to Dish's highly
conditional preliminary proposal." Sprint said it had no update
on the situation on Tuesday.
But even if Dish does not succeed Yong said of Dish's rivals
in telecommunications and pay-TV: "As a defensive move you have
to start talking to Dish."
SoftBank appears to have deeper pockets than Dish, the No. 2
U.S. satellite TV provider, but if it engages in a bidding war
Guggenheim analyst Shing Yin said it would be hard to estimate
"exactly where Dish's limit is."
Dish could end up accepting a network-sharing deal with
Sprint if it can buy some spectrum from Clearwire in exchange
for backing off from SoftBank's deal, Yin said.
SON WON'T WALK AWAY
SoftBank said it was already in the advanced stages of
receiving the necessary approvals for its Sprint deal, and
expected to wrap up the deal by July 1.
"The issue for Son is that he wants to build a global
company, he promised to do that. This is probably the one shot
he has of doing that, and I don't think he's going to walk
away," said Neil Juggins, Hong Kong-based regional telecoms
analyst at JI Asia, an affiliate of Societe Generale.
A Tokyo-based analyst who declined to be named said: "Son
isn't going to give up that easily. I expect him to come back
with a higher offer," he said.
That should prove straightforward, said a Tokyo-based
banking source: "Son won't be short of money, thanks to all the
banks. The crucial point is not about how much he can afford,
it's about how much return he wants to get."
"If Son did not think of a rival offer like this he was
careless, but I don't think he's careless. He is a thoughtful,
careful businessman ... and all the lender banks are willing to
lend to him," the source said.
SoftBank will go ahead with a dual tranche bond issue in
dollars and euros that is worth $2 billion, a company
spokesperson told IFR, a Thomson Reuters company. That bond
issue is to help fund its Sprint deal.
Even if SoftBank does walk, the Japanese company would stand
to make a roughly $3.5 billion profit.
SoftBank said last year that it had hedged its acquisition
with a forward exchange rate of 82.2 yen to the U.S. dollar,
saving some 200 billion yen ($2.04 billion) in the process. The
yen has since weakened 24 percent against the dollar.
SoftBank also stands to make about $1 billion from a $3.1
billion convertible bond it bought from Sprint last year at
$5.25 per share and can convert to shares if it abandons the
deal. Sprint shares rose 1 percent to $7.16 Tuesday after rising
more than 13 percent on Monday to a near 4-1/2-year high.
On top of all that, SoftBank would also be paid a $600
million break-up fee if Dish captures Sprint.
"Short term, yes, there are benefits that they would gain if
they walked away, but I think SoftBank shareholders would mark
them down quite heavily," said Juggins of JI Asia.