DISHing out the billions for telecoms

Bankers involved in mergers and acquisitions have been checking their telephones more often than text-crazy teenagers recently, trying to keep up with a flurry of offers for U.S. mobile-telephone companies.

On April 15 Dish Network, a satellite-television operator, became the latest bidder to enter the fray when it launched a $25.5 billion offer for Sprint Nextel, the country's third-largest wireless firm.

Dish is not the only suitor for Sprint. Last October Japan's SoftBank Corp. offered to buy 70 percent of the wireless operator for slightly more than $20 billion, and last week it boasted that its deal promised benefits "superior" to Dish's unsolicited one.

Sprint, in turn, is seeking to take full control of Clearwire, another wireless company of which it already owns half. T-Mobile USA, the fourth-biggest mobile operator, is pushing ahead with a plan to merge with the fifth-largest, Metro PCS.

The scale of the bidding is breathtaking. According to Dealogic, a data provider, wireless deals worth $49 billion already have been announced in America this year, compared with $53 billion worth of transactions for the whole of 2012. More offers could be on the way.

What is driving this deal making? And who is likely to come out on top when the dust settles?

The answer to the first of those questions is that the bids are aimed at helping America's mobile smaller fry compete more effectively with Verizon Wireless and AT&T, the behemoths that together serve about 70 percent of the country's wireless subscribers. The two titans' investment in their wireless networks and in the spectrum needed to carry voice and data traffic over them has dwarfed that of their rivals.

When it comes to spectrum, Dish has a clear edge over its rival for Sprint's affections. The satellite firm, whose boss, Charlie Ergen, is a former professional gambler, has cleverly snapped up billions of dollars' worth of airwaves which it has permission to convert to wireless use. In January it launched an unsolicited offer of its own for Clearwire. Ergen has made it clear that Dish does not want to build its own cellular network, but would rather find a partner with an existing one.

SoftBank cannot offer Sprint airwaves in America, but it can bring plenty of cash to the table, thanks to Japan's near-zero interest rates. It also brings the experience of Masayoshi Son, the firm's founder and boss, who snapped up several companies to turn SoftBank Mobile into an effective competitor against two larger rivals in the Japanese market. SoftBank claims that it is on track to close its deal with Sprint on July 1, but Son may have to raise his bid now that Ergen has joined the game.

T-Mobile's owner, Deutsche Telekom, already has had to sweeten its offer for Metro PCS after facing pressure from shareholders in the American firm who felt that the original terms would have left the combined company with too heavy a debt burden. On April 15 Metro PCS's board approved the revised proposals, which will be put to shareholders on Wednesday. If they are accepted, the merged firm will have debt of $11.2 billion, rather than $15 billion, and will pay a lower interest rate than originally planned, giving it more financial flexibility to buy radio spectrum and build its wireless network.

Regulators seem keen to give Sprint and T-Mobile a helping hand when it comes to spectrum. In a recent submission to the Federal Communications Commission, the Department of Justice urged it to make sure that smaller wireless operators get a share of low-frequency bands in a future auction of spectrum given up by television stations. Both Sprint and T-Mobile are short of such spectrum, whose ability to carry signals over long distances and into buildings makes it especially valuable.

Even if they get such help, though, the smaller firms still will find it tough to prosper. Mike Garstka of Bain & Co., a consulting firm, says that in most mobile markets around the world the two biggest operators make virtually all of the profit, leaving smaller rivals battling to survive. This has certainly been the case in Europe, where a long line of smaller operators have struggled to make money in an intensely competitive market.

Antitrust watchdogs rightly blocked AT&T's attempt to swallow Sprint back in 2011. Both it and Verizon Wireless are unlikely to stand by idly, however, while their competitors beef themselves up. AT&T could bid for a satellite operator or other firm that would bring it more spectrum.