After a drawn-out saga, Dish Network (click ticker for report: ) dropped its pursuit of Sprint (click ticker for report: ) Friday. Sprint seems intent on accepting SoftBank’s offer, and we do not believe Dish could afford to offer more for the US’ third-largest wireless company.
Yet, a dropped bid for Sprint does not mean Dish is out of the running for Clearwire (CLWR). On Thursday, Sprint raised its bid for Clearwire to $5 per share, a move valuing Clearwire at $14 billion (and something we had anticipated). Many may suspect that Dish’s decision to end its pursuit of Sprint as a declaration of peace, but we aren’t sure that is the case. Dish founder/chairman Charlie Ergen is well aware of a changing landscape that may weaken the competitive advantages of satellite providers such as Dish and DirecTV (click ticker for report: ). Media enterprise legend John Malone applauded Ergen’s efforts to piece together a stronger product offering and noted that he believes high-speed broadband access is a huge competitive threat.
We think Ergen will do whatever it takes to keep Dish as one of the top competitors in content distribution, and he may have to bid big for Dish to gain control of Clearwire’s spectrum. Ergen recently solicited a bid for $2 billion of bankrupt LightSquared’s spectrum that may not even be usable. Ergen wants spectrum, and he wants it badly. Given the willingness of Clearwire’s board to change its opinion on buyers, as well as the fact that the stock currently trades over Sprint’s $5 offer, we think Dish may make another higher offer.
If Ergen raises Dish’s bid for Clearwire, will Sprint counter? We believe so. We think SoftBank is aware that increasing the amount of spectrum Sprint uses will be paramount to turn the company into a viable competitor against Verizon (click ticker for report: ) and AT&T (click ticker for report: ) in the mobile space.
Valuentum’s Take
Spectrum is a very attractive asset (at this juncture), and Sprint and Dish could benefit tremendously by acquiring it. We wouldn’t at all be surprised to see bidding for Clearwire continue higher, and we think the assets would fit nicely under Sprint or Dish (though Sprint appears to be a slightly safer option). Nevertheless, we aren’t interested in shares of either company at this time. Our favorite idea in the space remains DirecTV—a holding in our Best Ideas Newsletter portfolio.