Media

As Sprint Evaluates $25.5B Offer From Dish, The Pay-TV Provider Plays Up Video, Quad-Play Benefits

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Sprint, the U.S.’s number-three wireless carrier, today issued a terse statement saying that it would evaluate “carefully” the “unsolicited proposal” from Dish, the country’s number-three pay-TV provider, to buy the carrier for $25.5 billion. Before today, Sprint had been in the midst of working through a deal to sell a 70% stake to Softbank for $20.5 billion.

That pre-existing deal came with a lot of visible support from both Softbank’s and Sprint’s top management, and came also with financial help worked in for the continued build-out of Sprint’s network (more on that here).

Meanwhile, in the absence of any more comment from Sprint itself at the moment, Dish’s chairman Charles Ergen dished out more detail behind its rationale for making a premium bid for Sprint: it’s about video, getting Dish subscribers locked in to more services, and having a connection to those customers, wherever they are.

“People want to look video wherever they are and this is converging,” chairman Charles Ergen said on the call.

The growth of mobile data usage, and the growth of mobile video, has extended a lot of the kind of content consumption activity that would have been saved traditionally for the home. Ergen referred to smartphones and tablets as “miniature high-definition televisions that you can take with you everywhere.” That’s something Dish has already been trying hard to court with services like Hopper for watching TV anywhere (and controversially skipping commercials, too).

Ergen also highlighted some of the shortcomings of Dish’s business today: “The cable industry does a good job in your home and wireless does well outside the home, but there’s no one company that does both really well,” Ergen said. “When you add Dish and Sprint together you have two services that can grow together.” The estimated pricetag that Dish puts on that extra opportunity as $24 billion. That opportunity is more commonly called “quad play,” encompassing broadband, TV, voice and wireless services.

Dish has been amassing wireless spectrum since 2008 and would bring, he said, “45MHz of unencumbered spectrum to the party” — no small thing in a country like the U.S. where mobile data use continues to grow even as smartphone adoption reaches penetration, but (like everywhere else) wireless spectrum remains a finite resource.

Borrowing data from Cisco, this is Dish’s vision of how mobile data use will rise:

mobile data growth

He said a combined Dish/Sprint/Clearwire (if things go their way) could end up with an “8-lane, uncongested highway” of 230MHz of spectrum compared to the two congested lanes Sprint has today (53MHz); or the four bumper-to-bumper lanes apiece for AT&T and Verizon (respectively at 106MHz and 107MHz). But… he wouldn’t be drawn out on whether this would potentially mean competition-busting, large, low-cost data plans to take advantage of all that open space.

Dish today has the spectrum but no network to run these services, so buying a network with millions of users already on it makes a lot more sense right now than building out a physical network from scratch. It also means opening the door to a new set of subscribers for cross-selling services.

dish sprint cross selling

Here’s Sprint’s full statement:

“Sprint Nextel (NYSE: S) today confirmed it has received an unsolicited proposal from DISH Network to acquire the Company. The Company said that its Board of Directors will evaluate this proposal carefully and consistent with its fiduciary and legal duties. The company does not plan to comment further until the appropriate time.”