The Hollywood Reporter -- The stock of Dish Network dropped on Monday even though chairman Charlie Ergen touted his company's $25.5 billion bid for Sprint Nextel, outlining his vision for the combined company on a conference call with analysts.
"We know that people want video and to be able to look at it anywhere they are," he told Wall Street observers. "We're combining the third-largest mobile operator and the third-largest pay-TV service. It gives us the chance to become number two or maybe number one."
Ergen also compared the Sprint offer to the final two minutes of a Seinfeld episode. After all, Dish previously acquired wireless spectrum, raising questions about the satellite-TV giant's ultimate strategy. "There are lot of things that happen in the first 28 minutes of the show," Ergen said about Seinfeld. "But things come together in the last couple of minutes."
As is typically the case with the shares of bidders, Dish's stock dropped in early Monday trading though. It was down 7 percent at $35.01 as of 10:15am ET. The stock had hit a 52-week high of $38.44 earlier this month. Sprint's stock was up 15.2 percent to $7.18 after hitting a 52-week stock of $7.33 earlier in the day.
Dish's $25.5 billion offer is about $5 billion more than an offer for Sprint that Japan's Softbank has previously made. But Ergen said that what Dish is offering Sprint goes beyond money.
He told analysts that he hopes that being able to combine Dish's wireless spectrum assets with Sprint's, taking some 14 million of its own subscribers and adding platforms like Sling, will allow the merged company to "deliver television wherever you are in a seamless manner." He said that the combined firm would forgo the data usage caps that more telecom companies are eyeing for their customers.
On his conference call, Ergen asked listeners to think about the differences in the Vatican's last two appointments of a pope. When Pope Benedict XVI was selected in 2005, there were hundreds of thousands of people cheering in St. Peter's Square, but last month, when Pope Francis was picked, most of those hundreds of thousands were seen carrying mobile video-enabled cell phones or tablets. "You can't imagine what the next decade is going to hold, but you know you are going to need bandwidth to do it," said Ergen.
Thomas Cullen, Dish's executive vp of corporate development, said that the company's competitors would be constrained by their bandwidth limits. In contrast, the combined assets of Dish and Sprint is said to have twice the bandwidth capacity of AT&T and Verizon. "If you have a data cap, 2 gigs is not a lot," he said. "Someone who gives you more than 2 gigs for the same money, that's attractive. Nobody is going to have a bigger pipe than Dish-Sprint."
Dish's executives pointed to other opportunities for the potentially combined company. In response to a question, a new over-the-top service was shrugged off, but Dish hopes to use the potentially big wireless capacity to allow non-traditional content producers the ability to broadcast and also allow Dish's customers to unicast their video streams.
With the introduction of the Hopper, Dish has been under fire from many broadcasters for wanting to eradicate advertisements, but Ergen also said during the analyst call that the developing technology would allow Dish to work with programming partners to better serve commercials to subscribers. "The Hopper is smart and knows what you're watching, what ads to serve," he said. "In the future, the phone is going to act as a wallet and know what you buy."
Wunderlich Securities analyst Matthew Harrigan called government approval likely if Sprint accepts Dish's offer. "The FCC and Department of Justice would almost certainly be amenable to a Dish transaction with Sprint or number four wireless player T-Mobile as pro-competitive given the market dominance of Verizon Wireless and AT&T," he wrote in a report. "Dish's video business is low growth and U.S. only, with limited long-term pricing power off a moderate income demographic," he said. "The combination of Sprint, Clearwire and Dish's spectrum...would likely enable an economic 50 GB monthly [broadband] consumption proposition for consumers, versus current Verizon Wireless monthly data consumption of still less than 2.5 GB."
Georg Szalai contributed to this report.
Related article on THR.com:
Dish Network Makes $25.5 Billion Bid for Wireless Company Sprint
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