--Dish Chairman Ergen says Clearwire deal would provide capital
for Clearwire and Sprint.
--If Dish doesn't succeed with bid, Sprint is "probably not a
likely partner."
--Clearwire was not Dish's only option, says Ergen.
(Updates with comments from conference call.)
By Shalini Ramachandran
Dish Network Corp. (DISH) Chairman Charlie Ergen made his case
for why Sprint Nextel Corp. (S) should accept Dish's offer for its
half-owned wireless affiliate Clearwire Corp. (CLWR), arguing such
a deal would provide capital for both Clearwire and Sprint.
Mr. Ergen also said that if Sprint accepted Dish's offer, it
would be Dish's "most likely partner" in a wireless network. But he
said if Dish doesn't succeed with the bid, "then Sprint's probably
not a likely partner."
Dish has confirmed that it made an offer to buy Clearwire for
$3.30 a share, along with offering to pay $2.2 billion for about a
quarter of Clearwire's spectrum. The takeover offer is pitched at
an 11% premium to the offer that Sprint made late last year. Sprint
owns half of Clearwire but doesn't exercise control of the company.
Mr. Ergen said because Sprint doesn't control the board, Dish has
"an actionable item" in front of Clearwire.
Speaking on Dish's fourth-quarter earnings conference call, Mr.
Ergen argued that Dish's deal for Clearwire "provides a superior
offer to shareholders...versus the Sprint offer" and "a good deal
for Clearwire because they [will] get much-needed capital." Mr.
Ergen said it's also "not a bad deal for Sprint because they end up
with a lot of capital to help their buildout."
"Sprint and Dish match up pretty well with where our spectrum
is," Mr. Ergen said. "Sprint has publicly talked about a network
vision to build a network to be shared by other people."
He said Clearwire was not Dish's only option. Mr. Ergen said
that Dish will have a better indication of the competitive
landscape come June, once the other merger deals in the wireless
industry come up for shareholder vote in the coming months. "As
these mergers and partnerships...go through, the FCC will weigh in
and ultimately" will signal to Dish "'yes, we want Dish in the
business or no, we don't care,'" Mr. Ergen said. "Then obviously
selling the spectrum becomes more of a reality."
Dish Network Corp.'s fourth-quarter earnings fell 33% as the
company said it saw higher programming expenses and charges related
to its Blockbuster U.K. arm.
The satellite operator added 14,000 pay TV subscribers in the
quarter, compared to 22,000 in the year-ago quarter. Its full year
results showed a turnaround from the year prior, as it added 89,000
pay TV subscribers, compared to a loss of 166,000 in 2011. The
company attributed the subscriber gains to increased advertising
associated with the Hopper set top box, which grabbed attention
last year over an automatic ad-skipping feature that evoked
litigation from the major broadcasters.
But those gains came at a cost. Subscriber acquisition costs
rose 12% to 1.687 billion in 2012. Increased programming costs
largely contributed to the 6% increase in subscriber-related
expenses to $7.25 billion. Those expenses totaled 55% of total
revenue, compared to 53% in 2011.
Dish reported a profit of $209.1 million, or 46 cents a share,
for the fourth quarter down from $313 million, or 70 cents a share
a year earlier. Revenue declined 1.2% to $3.59 billion.
Net income for the full year fell 58% to $637 million from $1.52
billion in 2011, primarily because of a $730 million lawsuit
settlement with AMC Networks Inc. (AMCX) and Cablevision Systems
Corp. (CVC). Dish also attributed the decline to higher programming
costs and increased advertising related to the Hopper.
Dish also reported out its Internet-access subscribers for the
first time, on the heels of its first full quarter of operating a
branded national broadband service called dishNET, aimed at
underserved and rural markets. The satellite operator added 78,000
broadband subscribers during 2012, more than half of which came in
the fourth quarter, compared to a loss of about 5,000 subscribers
in 2011. Broadband services revenue came in at $95 million for all
of 2012, still less than 1% of Dish's total subscriber-related
revenue. Dish reported 183,000 satellite and wireline broadband
customers as of the end of 2012.
The Blockbuster segment reported an operating loss of $35
million in 2012 compared to $1 million the year prior, primarily
due to charges associated with its U.K. arm, which is undergoing an
administration process akin to Chapter 11 bankruptcy in the states.
In a regulatory filing, Dish said that it is still reviewing the
cost of maintaining Blockbuster's retail store presence in the U.S.
and could close additional stores this year. It is currently
operating about 500 stores, down from the roughly 1,700 it
inherited when it bought Blockbuster out of bankruptcy in April
2011.
Write to Shalini Ramachandran at
shalini.ramachandran@dowjones.com
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