Dish Network (DISH) Chairman Charlie Ergen is giving investors an intriguing drama to follow as he attempts to outmaneuver Tokyo-based SoftBank Corp. (9984) for money-losing, high-speed Internet network Clearwire Corp. (CLWR) and the latter company’s valuable airwaves.
The competition between two billionaires, Ergen and Softbank’s owner Masayoshi Son ultimately is a battle to acquire Sprint Nextel Corp. (S), the third-largest U.S. wireless carrier and the majority owner of Clearwire. The losing bidder likely will consider making a deal to buy the 79 percent stake in the fourth-largest U.S. wireless company, T-Mobile, which currently is owned by Germany’s Deutsche Telekom.
Neither billionaire seems to be backing down, nor is either expected to be deterred if his rival gains control of Clearwire and Sprint. Ergen is a poker-playing entrepreneur who started in the satellite industry as a seller of big satellite-receiving dishes to rural customers before he launched a successful satellite TV business that allowed users to receive programming with much-smaller, 18-inch satellite dishes. Son, a highly competitive businessman is vowing to transform his company into the world’s biggest mobile communications services provider.
Both are determined to acquire an existing U.S. wireless carrier. Ergen already is gaining experience in wireless broadband for his company by announcing in May that Dish Network planned to develop a fixed wireless broadband service with NTELOS Holding Corp. (NTLS) in rural Virginia using a spectrum in the 2.5 GHz range. Broadband service speeds at the venture’s initial test sites are expected to be fast, ranging between 20 Mbps to more than 50 Mbps.
Ergen has amassed a track record of making strategic acquisitions during his tenure. His purchases at Dish Network include the assets of video entertainment company Blockbuster Inc. in a winning bid valued at $320 million on April 6, 2011. Dish Network currently is proposing to buy Sprint Nextel for $25.5 billion but will need to increases its offer to try winning support from its acquisition target’s board of directors.
SoftBank will be a formidable foe. The company strengthened its position earlier this week when Sprint separately agreed to a sweetened, $21.6 billion takeover by SoftBank, rejecting the higher offer from Dish.
If Dish is able to acquire the roughly 49 percent portion of Clearwire that Sprint does not own, the value of the SoftBank offer to acquire Sprint may fall. Without full control of Clearwire and its valuable airwaves, Sprint will not be able to offer a fourth-generation network to compete evenly with bigger U.S. wireless rivals Verizon (V) and AT&T Corp. (T).
In a speech today in Tokyo, Son said, “I am determined to be No. 1 in the world very soon in my industry. You are lucky not to be my competitor.”
He clearly is not lacking in confidence or bravado. Son also acknowledged that an acquisition of T-Mobile US Inc. (TMUS) would be a “Plan B” target if he is unable to buy Sprint. Deutsche Telekom, T-Mobile’s 74-percent owner, is eligible to sell its entire stake at once to a third party, such as Softbank or Dish, so such a deal is a possibility for either company if it loses in its bid to buy Sprint.
The landscape in mobile communications in the United States is changing, with video requiring additional bandwidth, and both Ergen and Son plan to be part of the industry’s future. Investors would be wise to watch to see how the consolidation plays out but both Ergen and Son have the money and willpower to be long-term competitors in the sector regardless of which one buys Sprint Nextel.
Paul Dykewicz is a seasoned journalist who is the editorial director of the Financial Publications Group at Eagle Publishing and the editor of the Eagle Daily Investor website. He also edits five monthly investment newsletters, Forecasts & Strategies, Successful Investing, High Monthly Income, Alpha Investor Letter and PowerTrend Profits, as well as a number of time-sensitive trading services.