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Will Dish run away with Sprint?

SoftBank, the Japanese operator, run by a Korean on Vodafone's old Japanese cellular network, made its bid last year. SoftBank offered US$20.1 billion in return for a 70 per cent stake. That proportion was to allay fears of foreign takeover, avoid political flak and ease the deal past the US regulatory authorities.

At the time the move was widely framed as a Japanese cash boost for Sprint - it wasn't and isn't. It's a takeover by the Japanese company and there's little doubt that once control is solid and settled, SoftBank's founder and CEO, Masayoshi Son, has plans to transform the carrier and shake up the US market, as he's done in Japan. (see - Son of Softbank: on his way to Number One?)

Planning and doing are different things, however. Big scale foreign forays into complex, regulated US markets are generally fraught and Mr Son's inevitable difficulties have started with one Charlie Ergen, the chairman of Dish Networks.

Ergen is a larger than life - hated and admired in equal measure - style deal-maker and gambler (always a warning sign, you would have thought). Although mired in debt with Dish as it now stands, Ergen is promising to stump up $25.5 billion to own all of Sprint Nextel (not just the 70 per cent that Softbank is offering)

Ergen's plan is to build a national "quad play" - fixed voice, mobile, broadband and multi-channel TV. As well as borrowed cash, Ergan has lots of spectrum to contribute to the large pot that Sprint will have if and when its plan to merge with Clearwire finally comes through.

Ergen is offering Sprint shareholders better value, he claims, since the Dish/Sprint Nextel synergies are more compelling, and in the long run, that value will be exposed as the entity carves out a substantial share of the US market.

In fact the offer is complicated and no doubt difficult to compare with SoftBank for shareholders (and it must be said that there has been somewhat of a lag as the larger institutions and interested parties tried to get their collective heads around what it all meant).

Dish's $25.5 billion breaks down to a $7.00 per share offer to Sprint shareholders - $4.76 per share in cash and 0.05953 Dish shares for each Sprint share, based upon Dish’s closing share price last Friday. That would give Sprint shareholders 32 per cent ownership of the new Dish/Sprint entity (and the debt). That, claims Dish, is an 18 per cent premium over SoftBank's offer.

So Sprint shareholders must now be thinking hard about the huge debt pile that Ergen must run up to get the whole thing through the short to medium term - never mind the long.

Some of the big hitters have concluded, "what the hell?" and are now making encouraging noises, no doubt in an attempt to bring SoftBank back to the table with a sweeter offer. Most recently billionaire investor, John Paulson and Leon Cooperman, the chairman of Omega Advisors - both holders of Sprint stock - have declared themselves happy to see a successful Dish bid.

That might be a pretty clear message to Mr Son. Now we'll see if he has as good a poker face as Mr Ergen.

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