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US satellite TV company Dish has swooped in to help move forward T-Mobile’s pending $26.5 billion merger with Sprint, according to CNBC. Dish and T-Mobile agreed to a divestiture deal on the assets T-Mobile would be divesting as part of the US Department of Justice’s (DOJ) conditions for greenlighting the merger.
The news comes a few weeks after we covered that Charter and Altice were the other two companies on the DOJ’s list of preferred buyers for T-Mobile’s and Sprint’s assets, and explored the possible role Amazon could play in the saga.
While specific terms of the deal aren’t provided, here’s what we know: Dish will receive more wireless spectrum to create its own rival network and will have access to the network of the merged company — called New T-Mobile — for six to seven years. Dish will also acquire Boost Mobile from New T-Mobile.
The DOJ still needs to sign off on the deal for it to move forward, though reports suggest approval will require more concessions from T-Mobile parent company Deutsche Telekom. One concern is Dish’s access to New T-Mobile’s network: The DOJ wantsDish to have unlimited access to T-Mobile’s network. However, the telecom is reportedly pushing back on this by wanting to cap Dish’s access to 12.5% of the network’s capacity.
Here’s why Dish is the most likely candidate to bring the pending T-Mobile-Sprint merger closer to reality:
- For T-Mobile and Sprint, Dish poses less of a threat in the fierce US wireless carrier market than other contenders.
- Dish will reportedly only leverage New T-Mobile’s network until it has deployed a network of its own. This agreement would keep Dish at bay for some time, as it will take years and cost up to $10 billion to create a new 5G network — a significant challenge considering Deustche Telekom wants to cap any “strategic Dish investor” to a 5% investment, which would hurt Dish’s ability to rely on a partner for capital for the buildout.
- Dish will also have to set aside resources to poach mobile customers, which is not an easy task. For comparison, Charter has been in the mobile market since July 2018 with Spectrum Mobile, its growing MVNO service, which falls back on Verizon’s network. Altice is planning to launch an MVNO service using Sprint’s network in the next few weeks that Sprint said is a “first of its kind agreement,” in which the companies have built a mutually beneficial relationship. And while Amazon has yet to invade the mobile space, the company would be at an advantage to accelerate its entrance given its deep pockets and extensive consumer base.
- For Dish, the company is under the most pressure among the potential contenders to invade the US wireless carrier market.
- The company needs to stay ahead of the evolving telecom landscape to offset the impact cord cutting is having on its top and bottom lines. US consumers have been abandoning their traditional TV services as they shift to cheaper forms of entertainment — Dish’s satellite-TV customer base shrunk by 1.1 million subscriber in 2018 and lost an additional 266,000 customers in Q1 2019. The firm’s total revenue fell 5.35% YoY in 2018, and net income dropped nearly 25%.
- Dish has accumulated troves of wireless spectrum over the last decade, but hasn’t fully utilized its licenses yet. The company spent over $20 billion on acquiring spectrum over the past decade and promised the FCC six years ago it would put the airwaves to use — offering broadband coverage to 70% of the population in 176 markets by March 2020. Dish risks losing its licenses if it doesn’t meet the 2020 deadline and is reportedly seeking to gain an extension as part of its negotiations to buy the divested T-Mobile assets.
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