Of Acquirers and the Acquired
There are reasons to be concerned about the future of Sprint Corp. in a telecom world gone acquisition-happy.
The bewildering series of bids and counteroffers in the telecom sector is one I’ve been following with some bemusement since Dish Network made its $25.5 billion pitch to buy Sprint Corp. in April. That effectively gummed up the works a bit on Sprint’s plans to sell a 70 percent stake to the Japanese firm SoftBank, a deal announced last fall.
So SoftBank wants control of Sprint. Meanwhile, Sprint has a majority interest in 4G network developer Clearwire, and is offering to buy its remaining shares, as well. Dish comes along with a market capitalization rate of $17 billion and says it wants to buy the larger Sprint (market cap $22 billion). Then Dish steps in at the last second to make its own bid for Clearwire, putting it in competition with Sprint—the very company it’s attempting to acquire. It’s kind of a corporate take on that old Abbott and Costello routine, and frankly, I can’t figure out who’s on first.
I’ve have various motives to follow this circus—as an investor, as a business journalist, and as a consumer.
• As an investor, I’ve had Sprint stock for years. I’ve always thought it good policy to put your investment dollars where your mouth is when we talk about the need for strong, locally based public companies. I wasn’t always happy about the outcome—the fortunately-failed WorldCom deal from 2000; the Sprint PCS stock price plummet in 2002; and the underwhelming outcome in the Nextel merger in 2005 has definitely left a mark. But after languishing for years, Sprint’s stock price is up 160 percent over the past year. So I like to think my loyalty has been rewarded, and I’d like to see Sprint keep that performance going. It would be nice if they’d start filling that campus in Overland Park with their own employees again, rather than renting out space like an office park.
• As a business journalist, Sprint is on the radar constantly. After all, they had been the largest employer in the KC area for years, and an absolute pillar of civic and philanthropic life here. The company is both a source of talented employees—many of whom have been included in Ingram’s recognition programs like 40 Under Forty, and a launching pad for entrepreneurs setting out on their own.
• As a consumer, I’m following the headlines largely because of personal experience with Dish. In a lifetime with a rich history of bad customer-service experiences, I can tell you that the series of comical errors involving multiple representatives and phone transfers to higher-ups at Dish cost two days of my life that I’ll never get back, and a good 50 points on my blood-pressure readings. Bottom line: These guys don’t make a living in telecom services, and their track record with customer service, from my personal experience, in what is supposed to be their sweet spot is anything but sweet.
Beyond those factors, I keep framing my view of these telecom negotiations with comments made earlier this spring by Peter Brown of Grassmere Partners, at Ingram’s Leadership Industry Outlook, which included several dozen of our influential and accomplished 40 Under Forty alums.
The former chief executive for AMC Entertainment said it was important that companies in Kansas City maintain a focus on becoming bigger, extending their reach, and staying home—as the acquirer, not the acquired. He made a great point about Embarq—a former spinoff from Sprint; what is it with telecommunications companies?—and its acquisition in 2008 by CenturyLink, a company based in Monroe, La.
It’s always been a point of personal and professional pride to tell visitors about the major employers and public companies that call Kansas City home, and I concur heartily with Brown’s assessment that Kansas City shouldn’t be losing C-suites to Monroe, Louisiana—no offense to the good folk down that way.
That’s one reason I was a bit wistful about the initial SoftBank offer for Sprint last fall. I know that the local company has been capital-starved and needs the cash infusion to move forward, but I’m disappointed to think the longstanding ties between Sprint’s leadership and the Kansas City region could be affected by that transaction. I sure hope not.
Maybe it’s just me; maybe I don’t understand big business. During and after an unfortunate experience with Dish, I made a number of targeted calls and fired off several e-mails to select company execs there. Response? Zip. About the time of the Dish offer for Sprint, I also sent an e-mail to CEO Dan Hesse, expressing reservations about the deal. He immediately responded—in exactly 7 minutes—with a note of acknowledgement. Those experiences speak volumes about corporate cultures and what constitutes professional courtesy the way those of us with Midwestern values practice it.
Albiet not a large shareholder, I’m not alone among those large and influential Sprint stockholders who think aligning with Dish would be the worst possible outcome for investors and customers. And, like Peter Brown, I believe the best outcome would be one where Sprint becomes the acquirer, not the acquired.
Joe Sweeney
Editor-In-Chief & Publisher