T-Mobile-Sprint Deal Serves Up Dish For Merger

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Talks resume this week, between Dish, U.S. regulators, Deutsche Telekom and SoftBank regarding the purchase of Boost Mobile. The Department of Justice is still weighing whether it will approve the merger that would create ‘The New T-Mobile.” The big question surrounding the deal, is whether regulators will allow the U.S. wireless market to go from four competitors (Verizon, AT&T, T-Mobile and Sprint), down to three.

Regulators believe Dish is uniquely positioned to become the fourth U.S. wireless provider as it’s spent the last decade acquiring nearly $20 billion of wireless spectrum through acquisitions and government auctions, sources tell CNBC. Dish promised the FCC in 2013, it would provide broadband coverage to 70 percent of the population in 176 markets by March 2020, as part of a $3 billion purchase of spectrum from two bankrupt operators, TerreStar and DBSD North America. 

Instead of trying to build a new wireless competitor, Dish has planned to build a narrowband (not broadband) network for wholesale Internet of Things usage rather than for consumer wireless purposes. Dish believes LTE technology will become obsolete and wants to wait to build a 5G network. If the FCC doesn’t approve, Dish risks losing $3 billion of spectrum. Ergen is pushing the FCC to drop its March 2020 deadline as part of discussions with Deutsche Telekom, Bloomberg reported.

The talks this week revolve around Dish using the Sprint/T-Mobile network to host its spectrum. Dish would use the Sprint/T-Mobile network, only until it has built out its own rival network, which may take years and cost billions of dollars. The focus of the discussion now, is how long Dish will be able to use the network and the economic terms of a revenue-sharing deal. Dish would also buy prepaid carrier Boost Mobile and additional spectrum as a divestiture to clear regulatory hurdles.

Dish poses a threat to a combined T-Mobile/Sprint because it will have an incentive to undercut prices immediately, to build up a subscriber count, said MoffettNathanson telecommunications analyst Craig Moffett. T-Mobile CEO John Legere, who is set to lead the combined company, has promised not to raise prices for three years if a deal is completed. 

“By putting Dish into business with no existing subscriber base and no existing ARPU (average revenue per user) to protect, the only available strategy for Dish is to aggressively underprice,” Moffett tells CNBC. “It’s almost unimaginable Deutsche Telekom would have any appetite where a solution would so radically destabilize the industry.”

Even if Dish can reach a deal with Deutsche Telekom that placates the DOJ, it’s still not clear a T-Mobile/Sprint deal will happen. The California Public Utilities Commission needs to approve the deal before it can close. And then the companies will need to battle 14 states attorneys general who have sued to block a deal. That trial is set for October 7, Inside Towers reported.

July 2, 2019

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