Dish abandons Sprint bid for now to focus on Clearwire

By Sinead Carew

NEW YORK (Reuters) - Dish Network Corp said it would not make a new offer to buy No. 3 U.S. wireless provider Sprint Nextel in time for a Tuesday deadline and would instead focus on its tender offer for Clearwire Corp.

The decision may be good news for Japan's SoftBank Corp, which is also trying to buy Sprint. A purchase by SoftBank could provide Sprint with access to more capital that it could use to beef up its network and compete better.

Satellite TV provider Dish said in a statement that it was not practical for it to submit a revised offer on the June 18 deadline imposed by Sprint even though it "continues to see strategic value in a merger with Sprint."

Dish said it would consider its options with respect to Sprint without providing further details. While missing the deadline would make it more complicated for Dish to make a new offer, in theory Sprint would have to consider any new offers it gets ahead of a June 25 shareholder vote on the SoftBank deal.

The Dish decision was the latest turn in a takeover battle that started on April 15 when Dish - led by its chairman and founder, Charlie Ergen - offered to buy Sprint for $25.5 billion in a challenge to SoftBank.

Known for his aggressive tactics in deal-making, Ergen is looking to expand into the wireless market as Dish's traditional pay-TV business has been maturing.

SoftBank is controlled by billionaire founder Masayoshi Son, who is known as a risk-taker despite his country's normally cautious corporate culture. If SoftBank succeeds in buying Sprint, it would rank as the largest overseas acquisition by a Japanese company.

After Sprint shareholders said they preferred Dish's offer, SoftBank was forced to raise its bid for Sprint on June 10 to $21.6 billion from its previous offer of $20.1 billion. The revised deal would give SoftBank 78 percent ownership of Sprint compared with a 70 percent stake under its earlier offer.

SHAREHOLDER VOTE

Sprint accepted the latest SoftBank offer as it provides shareholders with more cash than the previous agreement. Sprint shareholders are due to vote on Sprint's agreement with SoftBank at a June 25 meeting.

While SoftBank's latest offer is an improvement for shareholders, it provides $3 billion less direct capital investment in Sprint itself than the previous offer. New Street analyst Jonathan Chaplin said in a research note earlier on Tuesday that he believes SoftBank will make large capital investments in Sprint after the deal is done.

Paulson & Co, Sprint's second-biggest shareholder, has already said it would vote for the latest SoftBank deal but other Sprint shareholders have said they wanted to hear Ergen's response before making a decision on the latest bid.

Sprint shares fell 11 cents, or 1.5 percent, to $7.21 in after-hours trading, suggesting that at least some shareholders appeared to lose hope for a higher bid after Dish's statement.

SoftBank shares rose 5 percent in Tokyo following the announcement.

Along with shareholder support, SoftBank still also needs approval for the deal from the U.S. telecommunications regulator, the Federal Communications Commission.

The Japanese mobile operator still expects to be able to close its deal with Sprint in early July, a SoftBank representative said. Sprint declined to comment on the Dish statement.

Dish said that it was unable to meet Sprint's deadline because of changes the wireless company made in its agreement with SoftBank, such as higher break-up fees that raised the hurdles for a Dish deal.

CLEARWIRE BATTLE

SoftBank, one of Japan's top mobile operators, has promised that Sprint would be able to save money on equipment such as smartphones by getting bulk-buy discounts from vendors.

SoftBank has also argued that it could bring Sprint valuable expertise in wireless technology, an area where Dish's Ergen has no experience.

Dish's promise was additional wireless spectrum that it has bought in recent years as well as the opportunity to expand its video services to cellphone users.

But even if SoftBank wins the Sprint deal, its battle with Ergen is not over as Dish is also fighting with Sprint to buy out the minority shareholders of Clearwire, which is already majority owned by Sprint.

The board of Clearwire - a small wireless provider with a vast trove of valuable wireless airwaves that both SoftBank and Dish want - last week recommended that its shareholders vote against Sprint's $3.40 per share offer at a June 24 meeting and instead urged them to accept Dish's tender offer to buy Clearwire shares for $4.40 each.

Sprint has filed a lawsuit against Dish and Clearwire over the Dish offer and Clearwire's recommendation.

Some analysts have said that if Dish fails to win Sprint it could use a minority ownership of Clearwire as a bargaining chip to help it forge an agreement with SoftBank either to buy spectrum or to create a network partnership.

While SoftBank has said that it would be happy for Sprint to just own a minority stake in Clearwire, it would forgo savings and some control if Clearwire remains a separate company with a separate board and a separate network.

(Additional reporting by Greg Roumeliotis, and Jonathan Stempel in New York; Editing by Bernard Orr, Diane Craft and Chris Gallagher)

Source: http://news.yahoo.com/dish-abandons-sprint-bid-now-focus-clearwire-012535439.html

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