Are we watching two companies engaging in the usual mergers and acquisition maneuvering between rivals? Or are the daily moves and countermoves of SoftBank and DISH Network (NASDAQ:DISH), as they eye a pot containing Sprint Nextel (NYSE:S) and Clearwire (NASDAQ: CLWR), more reminiscent of high-stakes five-card stud?
First card -- face down, second card – face up
SoftBank is showing the Ace of Diamonds, and bids $20.1 billion dollars for a 70% share of Sprint, perhaps trying to bluff anyone else into dropping out. Interesting that it gives Sprint $8 billion up front, followed by Sprint signing a deal to buy the rest of its networking partner, Clearwire, that it didn't already own.
Masayoshi Son, CEO of SoftBank, has his poker face on, but it's obvious to Charlie Ergen, DISH CEO and a former professional gambler, that Clearwire and its spectrum is an essential element in SoftBank's plans.
So, DISH, with the Ten of Clubs showing, doesn't drop out. Instead, it surprises SoftBank (and the rest of the peanut gallery) with a $2.5 billion dollar counteroffer to Sprint's $2.2 billion Clearwire bid. Ergen must think that if DISH starts a bidding war for Clearwire, SoftBank might withdraw its financial support from Sprint's bid.
Third card -- face up
SoftBank is dealt the Two of Diamonds. DISH draws the Queen of Spades.
SoftBank stands pat, but Ergen elicits a break in Son's countenance when DISH makes a bold and unexpected counteroffer of $25.5 billion for Sprint.
Son meets that, and raises with a declaration that the DISH bid is "illusory."
DISH meets that, and raises by tattling to the Federal Communications Commission about SoftBanks ties to UTStarcom, a company that settled bribery charges in 2009 with the Department of Justice.
Not to be outdone, Son raises that with an alleged threat to investment bankers not to give DISH any financing, or risk losing the chance to partake in underwriting Chinese e-commerce company Alibaba's much-anticipated IPO. SoftBank owns one-third of Alibaba.
DISH meets that with another complaint to the FCC: "If SoftBank has the power to influence crucial financing decisions of a Chinese company ... then the proposed foreign ownership [SoftBank is a Japanese company] needs to be assessed in light of this Chinese company, as well."
DISH also gets a start with its financing by selling $2.6 billion worth of notes, and reportedly has four banks lined up for more loans.
Fourth card -- face up
SoftBank is dealt the Four of Diamonds, and DISH the Queen of Clubs.
SoftBank raises by, it is assumed, bankrolling a higher bid from Sprint for Clearwire after it looks less likely that Clearwire's minority stockholders would vote for Sprint's original offer. After all, Son has said, "[I]n the Sprint-SoftBank transaction, Clearwire's spectrum is the key."
DISH matches that by calling SoftBank's control of Sprint a national security threat. The "sale of wireless and wireline infrastructure with national strategic importance to a foreign company will weaken the security of the United States," DISH wrote the FCC.
Fifth card -- face down:
Son peeks at his last card, and considers what DISH might have. That hand could hold four Queens, a Queen-high full house, a Ten-high full house, three Queens, three Tens, or, at worst, a pair of Queens.
Suddenly, he raises by having SoftBank try to undercut DISH's playing of the foreign-control card, agreeing to have the U.S. government have veto power over one SoftBank appointed director to Sprint's board.
Ergen squints at his last card, and ponders. SoftBank is showing the Ace of Diamonds, Two of Diamonds, and Four of Diamonds. That's a possible straight flush, straight, three Aces, or a pair of Aces – or nothing, with Ace high.
On the face of it, Ergen's two Queens showing beats SoftBank's Ace high showing. What could DISH meet SoftBank's latest challenge with? And should DISH meet it?
Ergen is looking at his chips and thinking.