Market anticipates higher Sprint bid

Following Dish Network Corp.'s surprise $25.5 billion bid for Sprint Nextel Corp., the question is whether Softbank Corp. will counter with a higher offer.

Sprint traded Monday above Dish Network's $7 per share cash-and-stock bid. Shares of the Overland Park, Kansas, telecom closed up 84 cents, or 13.5%, to $7.06.

Softbank agreed to invest $20.1 billion in Sprint in October, taking a 70% stake in the company. The Japanese carrier would buy out some of the Sprint shares at $7.30 per share in cash but would include stock as part of the compensation.

Dish said that, in total, its offer would pay $4.76 per share in cash versus a prorated $4.03 per share in cash from Softbank. The Dish proposal would give Sprint shareholders 32% of the equity, while Softbank's offer provides them with 30% of the equity.

Satellite TV tycoon Charlie Ergen, chairman of Dish Network, argued that a merger of Dish, the third-largest U.S. pay television company, and Sprint, the third-largest wireless carrier, would create a more valuable company. Dish anticipates $11 billion in cost savings, besides benefits from marketing its services to a combined customer base.

Macquarie Group Ltd. analyst Amy Yong suggested that Softbank would respond with an offer of $7.50 per share or more.

Softbank has already issued $3.1 billion in convertible notes to Sprint as part of its buyout agreement.

Dish may be more "strategically desperate" than Softbank, in the estimation of Stifel, Nicolaus & Co. analyst Chris King. However, King added in a Monday report, Softbank has "deeper pockets" with which to bid.

Sprint does not necessarily face an either-or situation. Ergen said Monday that Softbank's investment would equate to a 5% position in a combined Sprint-Dish, adding that he would "certainly welcome" Softbank as a significant investor. Softbank would also collect a $600 million termination fee. The Dish Network chairman demurred on the subject of a potential bidding war, but did not exclude the possibility that there could be more developments.

A representative of Softbank could not immediately be reached Monday afternoon regarding the possibility of a revised offer.Sprint Nextel said only that its board would consider the offer from Dish. Macquarie's Yong wrote that Softbank and Dish could negotiate a joint venture that would leverage the assets of Sprint and Dish to provide mobile Internet and content. If Ergen lost a bidding war, she suggested, a merged T-Mobile USA Inc. and MetroPCS Communications Inc. could be a "consolation prize."

To prepare its bid, Dish retained a team from Barclays plc led by Ozzie Ramos and Ricardo Zubieta and including Silvia Manak, Greg Dalvito and Adam Sutker.