Dish Really Doesn't Want to Buy Sprint, Grubman Argues

Jack Grubman, the once-influential telecom equity analyst who now is banned from the business, remains an astute observer of the U.S. telecom business. Count Grubman among those who believes Dish Network really does not want to own Sprint or Clearwire. "[Ergen] wants to agitate … to get a network access deal from Sprint," the founder of consultancy firm Magee Group said. 

In effect, the Dish Network bids for Clearwire and Sprint really are bargaining chips intended to convince Sprint and Softbank to work with Dish Network as it creates a new national Long Term Evolution network.

Grubman does not seem to believe the Dish Network gamble will ultimately result in the upstart taking significant share from the market leaders, or even continuing to exist as a going concern. 

"For someone who made his name covering the 1990s explosion in the telecommunications sector, the "strategic logic" behind Dish Network's bid for Sprint Nextel brings back bad memories," Grubman said.  

"A newly formed, highly leveraged company promising to take market share from more established competitors with stronger, less leveraged balance sheets is a movie I have seen before. Trust me, it ends badly," Grubman said. 

Veterans of all the various disruptions within the U.S. telecommunications business might tend to agree that there is very little precedent, at least so far, for a true upstart to take market leadership, on a sustained basis, from the leaders. 

Equity value will not be created. But at least so far, no challenger has managed to upset the ranks of leading service providers. That is not to say it "cannot be done." It just hasn't happened   yet.