Still, the fund's support for Dish's proposal, which Dish chairman Charlie Ergen said is a 13% premium to SoftBank's offer, could be an attempt to coax a bidding war.

"Dish needs to firm up the financing but it's a compelling offer and Ergen seems fully committed. It will be interesting to see how the Sprint Board and Softbank respond," Paulson added in his statement.

If Paulson is playing a game to draw higher bids, the risk, of course, is that SoftBank walks away from its offer.

"SoftBank believes that the agreed terms of our transaction with Sprint offer Sprint shareholders superior short and long term benefits to DISH's highly conditional preliminary proposal," the company said in a Tuesday statement.

"The SoftBank-Sprint transaction is in the advanced stages of receiving the necessary approvals and we expect to consummate the transaction on July 1, 2013 with the terms already agreed."

In opposing the initial terms of MetroPCS's takeover, Paulson & Co. was accused by T-Mobile CEO John Legere of being greedy.

Paulson objected to such language and said the fund's focus was on debt reduction of the merged entity.

The fund relented and said it would back an amended merger offer to lessen debt levels by $3.8 billion that also netted MetroPCS shareholders better terms.

For Paulson, getting better terms from SoftBank's proposed merger with Sprint, however, will likely increase the company's pro-forma debt. SoftBank will either have to raise its offer, or Paulson could back a Dish proposal that significantly increases the company's debt.

As hedge funds such as Paulson & Co. await a response from SoftBank and from Sprint's board of directors on merger efforts, they should prepare to explain what debt levels are sustainable for wireless providers such as Sprint and T-Mobile as they try and revive competition with cash-rich behemoths AT&T and Verizon.

Consolidation efforts, after all, should be targeted at making gains for consumers and not flighty hedge fund investors.

Overland Park, Kan.-based Sprint said on Monday its board of directors will evaluate Dish's proposal "carefully and consistent with its fiduciary and legal duties."

Sprint shares fell over 1% in Wednesday trading to $7.09 after jumping 13% on Monday following Dish's proposal. Dish Network shares fell slightly to $37.85.

-- Written by Antoine Gara in New York

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