While AT&T's failed 9 month pursuit of T-Mobile allowed Verizon to add more ground between it and its closest competitor, it also ended with AT&T giving up some prized spectrum to T-Mobile as part of a break-up fee that was triggered when the former pulled out of the deal due to regulatory deadlock. In addition, AT&T had to pay $3 billion in cash to Deutsche Telekom as part of that fee. During AT&T's attempt to persuade the DOJ and FCC to green light the deal, Verizon was adding spectrum from Comcast, Time Warner and Cox Communications. And despite purchasing some spectrum from Qualcomm, AT&T needs more, especially when Bloomberg points out that Verizon has 56% more LTE spectrum than AT&T.
There have been rumors that AT&T would look to add spectrum by making a acquisition of pre-paid carrier MetroPCS or by buying Leap Wireless. But that would put AT&T in the familiar place of having to get approval from the government and if AT&T had trouble buying T-Mobile, would the DOJ and FCC allow them to buy MetroPCS, especially since the pre-paid carrier has an LTE network? A purchase of Dish Network would come with a lot less regulatory hassle, something that AT&T brass would have to like.
Following FCC approval, Dish Network wants to move spectrum it had acquired from DBSD and TerreStar into mobile-device spectrum with a value of $9.4 billion. AT&T would probably have to pay $50 for Dish, which would give the company a value of $22.3 billion, and $4.9 billion in debt would have to be assumed. With the satellite company's stock currently trading at $29, AT&T would be paying a whopping 72% premium for the company, the highest premium for a tech take-over valued at more than $5 billion since 2000, according to Bloomberg.
Roger Kay, an analyst with Endpoint Technologies, said that "Dish would be a good option for AT&T [as] the carrier is spectrum-starved and it needs to ramp up fast, but the market is already primed for that scenario. AT&T won't find any bargains." Other analysts agree that AT&T needs to do something to stop Verizon from adding to the gap between it and AT&T. Recon Analytics analyst Roger Entner said in a telephone interview, "They [AT&T] are a year behind Verizon in the LTE race. Dish would undoubtedly be a good combination and it would solve a lot of AT&T’s problems."
The billion dollar question is whether AT&T would agree to pay a 72% premium to buy Dish. Company stockholders might object to paying $50 a share for a company currently trading under $30 a share. Still, things are getting desperate for the carrier as far as spectrum is concerned. That factor combined with the company's wish not to repeat the T-Mobile scenario means that AT&T executives may not mind paying so much for Dish Network as long as the deal succeeds.
source: Bloomberg via eWEEK.com