Jim Patterson, CEO of telecom consultancy Patterson Advisory Group, breaks down the talks between T-Mobile parent Deutsche Telekom, Dish Network and the Department of Justice over the Sprint acquisition in a blog post. While others have reported T-Mobile and Sprint would likely seek an extension of their July 29 deadline to get the deal done, Patterson is not convinced, believing the parties would work through this week.
Five items are likely on the negotiating table, Patterson believes:
1) Dish change of control and capitalization provisions-such as preventing deep-pocketed tech or cablecos from using low Boost Mobile Virtual Network Operator (MVNO) pricing to compete against the new, combined T-Mobile – Sprint.
2) The ability of Dish to use the T-Mobile network beyond a set level. “This appears to have been resolved through a tapering mechanism which incentivizes Dish to build a competitive network over the next three to four years,” writes Patterson.
3) Relief or a build-out extension from the FCC would enable Dish to keep its AWS-3 spectrum previously won at auction. “A difference could arise between whether Dish has completed an ‘initial design’ or has completed a fully-functioning, scalable network that is widely available for IoT applications,” states the expert.
4) The economics and terms of the MVNO deal. He believes those are likely the opposite of what’s typically seen in the wholesale market as the new T-Mobile network would need larger margins to spark more incentive to create a fourth wireless infrastructure.
5) Transition details such as how much the new T-Mobile can use promotions, dealer relationships and other ways to attract Boost customers. He notes T-Mobile is building a distribution network in less populated areas as it rolls out the 600 MHz spectrum and that’s also where Dish is focused.
Patterson says these five points likely comprise the guts of any major deal to be hammered out between Deutsche Telekom, the government and Dish. “Move one lever, and another likely will change. Too much activity, and the deal is likely off the table,” writes the telecom consultant.
The bottom line question in Patterson’s mind is: “Which is the greater competitive threat, a recapitalized Sprint that could be eventually acquired by a cable or technology company, or Dish + Boost + AWS-3 Spectrum which receives tens of billions of dollars in additional capital from cable, technology and private equity companies? The answer to this question likely determines what happens this week.”
July 23, 2019