Dish apparently paving the way to make formal bid for T-Mobile

Few companies have caused such drama in the telecommunications industry, and had mixed results to show for it, as DISH Network.  The second largest satellite TV provider in the United States has been gobbling up spectrum licenses at nearly every opportunity. CEO Charles Ergen very much wants Dish to become a wireless carrier to augment its shrinking margins in the pay-TV industry.  Without any financing lined up, Dish stormed into the middle of negotiations between Sprint and SoftBank, as well as Sprint’s efforts to buy the portion of Clearwire it did not already own. It created a grand drama of PR campaigns, and lawsuits. In the end, Dish walked away empty handed.

The company continued attempting to acquire more spectrum, with some success. As it is, Dish is one of the largest holders of spectrum licenses.  The problem is that Dish has not been doing much in the way of building any infrastructure to operate the spectrum it owns. Some of that spectrum is use-or-lose, and the clock is ticking. Some fixed-wireless platforms have been built in rural areas, but Dish’s holdings are nationwide, and it either needs to buy a carrier to get to work, or it needs to start building one itself, or a carrier needs to buy Dish.

Dish has been rumored to have an interest in T-Mobile USA if the merger talks with SoftBank fell through, and it looks as though Mr. Ergen is greasing the skids to eventually put an offer on the table. T-Mobile’s majority owner, Deutsche Telekom, recently rebuffed a $15 billion offer from France’s Iliad SA for a 56% stake in the carrier. Iliad is now looking for partners to sweeten the deal.

Sources close to communiques between Dish and Deutsche Telekom say that the former may be ready to enter formal talks, depending on how things shake out after the AWS-3 (2155-2175MHz) auctions in November. At this time though, Dish has not even hired a bank to advise how to orchestrate a T-Mobile acquisition.

T-Mobile USA’s market cap is roughly $25 billion at $30-per-share. Which is in the same ballpark of what Dish might have paid for Sprint. The difference here is that in order for Deutsche Telekom to consider any offer, some type of premium over the current trading price is necessary. What the means as to where Dish would have to start its bidding is not certain, but who ever starts making offers, expect asking prices to be somewhere north of $35-per-share.

source: Bloomberg