Dish Network is again looking to merge its business, this time with T-Mobile, the nation’s fourth-largest wireless carrier. Dish Chairman Charlie Ergen has spoken with T-Mobile parent company Deutsche Telekom about making a deal in the coming year, Reuters reported Dec. 18, citing confirmation from three sources.
Sprint, the nation’s third-largest carrier, is reportedly also considering buying T-Mobile. The Wall Street Journal reported Dec. 13 that Sprint is “studying regulatory concerns” and could make an offer in the first half of 2014. It estimated that the sales price could exceed $20 billion.
According to two sources, Dish doesn’t want to “sit on the sidelines if Sprint does bid for T-Mobile,” Reuters reported.
AT&T spent most of 2011 trying to buy T-Mobile, in a deal that was ultimately shot down by Federal Communications Commission (FCC). The group feared that combining the second- and fourth-largest carriers would result in an entity so large it would snuff out competition in the industry.
Further reducing the number of Tier 1 carriers below four is also a concern, again in regard to competition. Canada currently has three and has been trying to add a fourth.
“A market with only three major carriers would be much more prone to ‘coordinated effects’ where ‘competing’ companies act as an effective cartel,” John Bergmayer, senior staff attorney with consumer advocacy group Public Knowledge, wrote in a Dec. 13 blog post. He added, “Let’s pop this trial balloon quickly, please.”
As a pay-TV provider, not a carrier, an offer from Dish wouldn’t raise the same red flags with the FCC as would an AT&T or Sprint bid.
Which is not to say Dish can get the job done.
In April, Dish interrupted Sprint’s merger with Softbank by making its own offer for Sprint. It bid $25.5 billion, besting Softbank’s $20.1 billion offer.
Knitted into the Sprint-Softbank deal was an acknowledgment that Sprint would try to buy the roughly 50 percent of 4G partner Clearwire that it didn’t already own. (Sprint buying Clearwire was considered advantageous, but the Softbank deal didn’t insist on it.)
By June, after much paperwork had been traded and reviewed by all parties, Softbank had raised its offer to $21.6 billion, in exchange for a larger stake in Sprint, and Dish finally walked away from the deal. Then, it tried to outbid Sprint for Clearwire.
The Clearwire board initially put its chips behind Sprint, then dumped Sprint for Dish, and then swapped back again. Sprint eventually completed the purchase, but not before its original bid of $2.97 a share—considered high by some analysts when it was first announced—was raised to $5 a share, due to Dish’s involvement.
While a Dish bid is likely to proceed more easily than a Sprint bid, “Dish would have less synergies with T-Mobile than Sprint, because it owns wireless spectrum but does not have a network or infrastructure,” Reuters reported.
However, Dish and Sprint suggested Dec. 18 that sometimes it can be more ideal when each partner brings something different to the table. The two announced a plan to deploy fixed, in-home LTE services, using Sprint’s LTE network and 2.5GHz spectrum and Dish’s fleet of professional technicians to install the LTE modems.
“This trial with Dish has great potential,” Michael Schwartz, Sprint senior vice president of Corporate and Business Development, said in a statement, “as it combines the key capabilities and assets of both companies.”