Dish declined Sprint merger talks months before trying to outbid SoftBank

May 1, 2013, 9:55pm MDT

Greg Avery

Reporter- Denver Business Journal

Dish Network's Charlie Ergen and SoftBank's Masayoshi Son have trashed each other in public the last two days over their competing multibillion-dollar bids to buy Sprint Nextel Corp.

Son, Tokyo-based SoftBank Corp's founder, on Tuesday called Dish Network's $25.5 billion merger idea "big-mouthing" and said Dish's offer is less valuable and too debt heavy to best SoftBank’s $20.1 billion bid.

The same day, Dish Network Corp.(Nasdaq: DISH) indirectly bad-mouthed Sonin a filing to the Federal Communications Commission, pointing out allegations of corruption years ago at a SoftBank-related Chinese company. SoftBank denounced the Dish filing in its own letter to the FCC.

Ergen then told USA Today on Wednesday that having foreign ownership of Sprint would be inferior to having Sprint bought by Douglas County-based Dish, and having its English-speaking employees helping the wireless carrier's customers.

Adding to the surprises, there's this: Long before the war of words broke out, it seems the Overland Park, Kan.-based Sprint (NYSE: S) talked with Dish about a merger – a few days after receiving the $20.1 billion offer from SoftBank.

That’s right, Sprint broached the idea of a merger with Dish last September. And Dish wasn't interested.

That tidbit's buried in a couple sentences of Sprint’s proxy filed Wednesday for the SoftBank deal. It’s a surprise given the public battles between Dish and Sprint (and now SoftBank, too) that have gone on for months.

Outside the public eye, it seems Dish and Sprint could explore partnerships. Though not successfully.

During five months starting in April last year – before SoftBank approached Sprint about deals – Dish and Sprint discussed network partnerships even as they clashed over regulatory approval and standards for Dish Network’s newly acquired wireless spectrum.

Then, on Sept. 28, days after SoftBank made its offer, Sprint’s head of mergers and acquisitions, Keith Cowan, revealed he had talked with Dish CEO Joe Clayton about the idea of a Dish-Sprint merger.

Clayton replied that Dish was too focused on regulatory matters at the time, plus he considered Sprint’s market price inflated compared to Sprint’s “fundamental value,” the Sprint proxy filing said

What would’ve happened had Clayton responded differently? Probably, not much. By then, Cowan was on his way out at Sprint. He left the company shortly afterward.

And Dish already had its eye on other deals.

Dish made an unsuccessful $4 billion bid to buy MetroPCS in August, though that wasn’t publicly known until months later. At the same time, Ergen offered Bellevue, Wash-based Clearwire Corp. $2.2 billion for some of Clearwire’s spectrum, and to get an option to buy 45 percent of Clearwire for another $1 billion.

But, Ergen wasn’t willing to bid for Clearwire shares until after the FCC approved Dish using its new spectrum for wireless broadband, Clearwire’s proxy said. That approval didn’t come until December.

By then Sprint and SoftBank decided to do their deal, and Sprint had reached agreement to buy the half of Clearwire it doesn’t already own.

Dish Network is left fighting to break one or both of those deals apart.

Clearwire shareholders are scheduled vote on Sprint’s offer May 21. Sprint has scheduled its vote on SoftBank’s offer for June 12.

A special committee of Sprint directors is reviewing Dish Network’s offer. It's expected to announce before the shareholder vote whether or not Dish’s offer could be considered superior to SoftBank’s.

Greg Avery covers tech, telecom, aerospace and bioscience for the Denver Business Journal and writes for the "Boosters, Bits & Bioscience" blog. Phone: 303-803-9222.