It seems fitting that the best case that Charlie Ergen and DISH can muster for their bid for Sprint is false patriotism. Softbank they say will be a national security risk. Fitting because Samuel Johnson warned us almost 240 years ago that patriotism is the last refuge of the scoundrel - and Charlie Ergen is a scoundrel.
The misdirection from DISH was from the beginning. Here was the pitch for the DISH offer from the beginning:
The case for the DISH's offer is that it offers $4.76 per Sprint share in cash plus 32 percent of the surviving company. Softbank by contrast offers $4.03 per share in cash plus only 30 percent of the surviving company.
More cash and a larger proportion of the surviving company - what is not to like about that?
Calling Charlie's bluff on this - plenty actually. You see the surviving company in the Softbank case is Sprint after Softbank has injected $8 billion into it. It is a highly credible competitor for AT&T or Verizon.
And the surviving company in Charlie Ergen's example is a highly levered beast called DISH-Sprint. DISH Sprint will be bereft of cash and loaded with debt because the cash part of the offer comes largely from leverage.
So it is worth understanding what DISH is.
DISH is a second-tier satellite provider that lost the battle for quality subscribers to DirecTV. Charlie always had an inferior offer based on low cost - when DirecTV had The Sunday Ticket, and was first to market with high definition and other quality-improving features. The Sunday Ticket was a clear - albeit expensive differentiation - it allowed you to watch your home team NFL game even when you did not live in your home town - a great offer in a country with as much upper-income job mobility as the USA. That combined with relatively poor service and lack-of-speed with high-definition meant that DISH found itself caught in a low average revenue per user (ARPU), low growth world.
Until Charlie hit upon a new business model. The Hopper.
The Hopper is a standard personal video recorder (PVR) attached to the satellite receiver - however it records live the whole of prime time television every night. It then allows you to watch the TV with the advertisements removed for you. To quote DISH's website:
Hate commercials? DISH created commercial-free TV so you can save an hour each night! Now you can instantly skip commercials in recorded primetime TV. Only DISH gives you ad-free TV with the Hopper®.
What an offer - the TV you were going to watch anyway without those pesky little adverts.
But there is of course a problem: the TV networks did not agree to this. Indeed this is as much a threat to the business of commercial TV (which is still advertising supported) as Napster was to the music business. It is thievery, nothing more. And all four networks are suing DISH for this. You can read the story in The Hollywood Reporter if you wish under the unsurprising title of Charlie Ergen is the most hated man in Hollywood.
The Hopper has done wondrous things for DISH. Subscriber numbers are growing sharply after stagnation. The question of course with the Hopper is how does it end? Does it end with Charlie having to stop it after lawsuits, or some legislative change or the death of commercial TV all up. Either way it looks to be an unsustainable advantage built on an unethical and possibly illegal business model.
It is small wonder Charlie is in the game of diversion. He claims his offer is superior but he is offering crappy DISH stock and is diverting with Patriotism in the time honored method of scoundrels and thieves.
And he is doing it for a reason. He doesn't want anyone looking at DISH (and hence DISH-Sprint) too hard. Because unethical and arguably illegal businesses should trade at a discount - and - dear Sprint shareholders - you should not accept stock in one in exchange for your perfectly good phone company.
PS. Disclosures - Bronte owns both Sprint and Softbank. I have not communicated with anyone from Softbank - but Masa Son, if I am in Tokyo you owe me a sake.
Our big holding is in Softbank.