Dish Network Corp. on Friday abandoned its pursuit of Sprint Nextel Corp., clearing the path for Sprint’s $21.6 billion deal with SoftBank Corp.
Dish will continue to pursue Clearwire Corp., Sprint’s wireless network partner.
But with Dish’s announcement Friday, Sprint shareholders are now expected to approve Tokyo-based SoftBank’s plans to buy 78 percent of Sprint when they vote Tuesday in Overland Park.
Dish battled SoftBank for control of Sprint since mid-April when it first offered $25.5 billion for the Overland Park-based wireless phone company. Sprint had rejected the proposal as one it could not act on.
Analysts also had said Dish’s plans would leave Sprint with too much debt. But the bid got shareholders’ attention because it would give them more cash for their shares than SoftBank’s bid.
SoftBank and Sprint revised their agreement on June 10 to provide more cash to investors.
In a filing Friday with the Securities and Exchange Commission, Dish said it “decided to abandon its efforts to acquire Sprint.” The filing did not say why Dish dropped out.
On Tuesday, however, Dish said it would not be able to meet Sprint’s deadline that day to make a “best and final offer” because the agreement between Sprint and SoftBank had made a bid “impracticable.”
It complained that the agreement included breakup fees, rules that made it difficult for Sprint to consider rival bids superior to the SoftBank agreement and other “extreme deal protections.”
Bill Ho, an industry analyst at 556 Ventures LLC, said Dish Chairman Charlie Ergen may have decided to drop out of the Sprint bidding for more practical reasons.
“Sprint was too much to go after,” Ho said. “He (Ergen) couldn’t up the stakes. SoftBank had deeper pockets.”
The news that Dish dropped out pushed Sprint shares down 10 cents to $6.97 Friday. Dish shares gained $1.23 to close at $40.41.
Although Dish’s exit likely has settled the battle for control of Sprint, Dish continues to battle for a stake in Clearwire, which is Sprint’s wireless network partner. Some some analysts have said it has been Ergen’s target throughout the contest.
Sprint, SoftBank and Dish each see Clearwire as valuable mostly because it controls significant amounts of wireless spectrum, which are the licensed airwaves that carry the streaming video, app downloads and other uses of mobile data that make smartphones and tablets popular with consumers.
Dish, a satellite television company, also owns wireless spectrum and has said it wants to get into the wireless business. Gaining control of Clearwire would provide Dish with additional spectrum it needs as well as a network of towers, radio antennas and other equipment and connections to put the spectrum to use.
Buying even a sizable stake in Clearwire could give Dish leverage to negotiate a purchase of some of its spectrum or perhaps a favorable deal to buy access to Clearwire’s network or Sprint’s network to launch a wireless service. Sprint has said it would be interested in “hosting” other companies’ spectrum on its network.
Dish’s first bid had been for control of Clearwire. It made an offer in January and turned to a bid for Sprint only after months of unsuccessful negotiations with Clearwire.
“At that point, we believe Charlie (Ergen) felt his best option to get a seat at the table was to go after Sprint himself,” Wells Fargo Securities analyst Marci Ryvicker said during a call with investors in May.
Sprint and SoftBank may not have been interested in a deal with Dish because they see Clearwire’s spectrum as a key asset in their plans to compete against Verizon, AT&T and T-Mobile.
Sprint and Clearwire agreed on a revised merger plan Thursday that would pay Clearwire’s other owners $5 a share for the roughly half of Clearwire that Sprint doesn’t already own. The price values the transaction at $3.9 billion.
Some Clearwire shareholders that balked at two previous deals with Sprint — at $2.97 a share and at $3.40 a share — said they supported the higher-priced deal.
Clearwire shares gained 3 cents to close at at $5.08 Friday. It suggests that buyers expect yet a higher bid for Clearwire.
Dish currently is offering to buy shares directly from investors for $4.40 a share in what Wall Street calls a tender offer. It could decide to raise the price it is offering.
A higher offer might disrupt Sprint’s new agreement with Clearwire, just as Dish’s tender offer had broken up their original merger plan.
Shareholders of Clearwire, other than Sprint, will vote on the new Sprint deal July 8. Analysts said that leaves the door open for Dish to make its next move.
“The way this thing has gone, two weeks is a lot of time for things to happen,” said Jeff Silva, a telecommunications industry analyst at Medley Global Advisors.
It’s also possible that Dish moves on, perhaps to consider a deal with Sprint rival T-Mobile.