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

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

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13 Comments

1. Kishin

Posts: 706; Member since: May 30, 2013

It would not be so bad, but i still want Tmobile to stay solo.

2. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

Not really a good partner for T-Mobile. Hopefully some better options turn up.

3. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

What about T-Mo buying Dish? I don't know if the financials would work; just trying a bit of thinking out of the box.

4. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

I'm not sure why T-Mobile would want to buy Dish. IIRC, Dish has a lot of the same sort of low quality spectrum that Sprint owns -- 2500Mhz and stuff like that. Just buying the bandwidth on the market and via auctions will be far far cheaper than buying Dish. IMO, T-Mobile needs a deep pocketed investor who can capitalize T-Mobile's network buildout and make sure T-Mobile can land all the trendy phones. I think Softbank made a mistake and bought Sprint when they really should have bought T-Mobile (provided there really was a choice to do this). Though Softbank carries a lot of debt, so perhaps it really wouldn't have been something good over time. If Google could handle the anti-trust issues, they could have shaken up the entire US telecom industry with a T-Mobile purchase. Maybe they still will have a chance to do this.

6. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

Out of curiosity, what is the anti-trust issue(s) in Google buying T-Mo? The acquisition wouldn't reduce the number of competitors in the wireless telecom market. If Google were serious with the acquisition, they could introduce a real fight to AT&T and VZW. I just don't see any synergy in T-Mo being acquired by Google. As it is, Google has access to T-Mo customers using Android handsets already with no investment in T-Mo.

8. TheRequiem

Posts: 245; Member since: Mar 23, 2012

He doesnt know what he's talking about, as usual...

13. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

The anti-trust issues would come out of various governmental/political concerns about vertical consolidation, not horizontal consolidation. At some point, Google would like to own all the pipes they need. They have a great start on this on the ground with the various lit/dark fiber purchases they have made over the years, but they are still beholden to ATT, VZW, Level3, etc., in some areas. If Google owned a wireless company, they would have a lot of flexibility to deliver high speed services to many more customers a lot more easily than the one-at-a-time Google Fiber deals they are doing now. Now there alternatives. Google could buy one of the few tower holding companies and get access to a lot of towers. They could then build a data-only network that wouldn't have to deal with calls, minutes, texts, complicated plans, legacy customers, legacy plans, etc. That would also have some potential to shake up the market. Imagine a data-only version of T-Mobile, say D-Mobile, with vastly reduced costs and superior agility due to massive ownership of towers. Could do some very interesting things. Maybe D-Mobile would start by making data prices $1/GB/mo. You get the idea :)

7. TheRequiem

Posts: 245; Member since: Mar 23, 2012

You mean the low quality spectrum that T-Mobile has... which is AWS. Dish owns AWS, like T-Mobile and Verizon. 2500 mhz spectrum is not low quality, it has the highest capacity of most of the bands out there.

10. DnB925Art

Posts: 1168; Member since: May 23, 2013

Absolutely correct. 2500Mhz is great for urban areas where you can space towers closer together and carry heavier capacity (high density areas).

12. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

T-Mobile has a coverage problem that is predominantly outside of the urban cores. Hence T-Mobile's interest in lower frequency spectrum, such as their recent purchase of 700Mhz blocks from Verizon. The lower frequency spectrum is great not just for more rural coverage but also for building penetration. As you know, T-Mobile already owns a significant chunk of 1900Mhz bandwidth. They probably don't need more of the same except in areas where they have capacity issues. So, in the bigger scheme of things, T-Mobile getting a bunch of 2500Mhz spectrum from Dish by acquiring the company is pretty much paying 10-20 times what that spectrum is worth and having no practical purpose for it.

5. 13Elves

Posts: 93; Member since: Feb 21, 2014

Bad news. The minute Tmo is bought boom! here come the contracts and crappy service again. Tmo is perfectly capable of making it on its own. It can extract growth from Sprint customer base. I am very happy with Tmo and I hope it nvr gets bought.

9. jasonmadura161

Posts: 12; Member since: Oct 08, 2013

I am ok with this.

11. DnB925Art

Posts: 1168; Member since: May 23, 2013

Oh hell no, not Dish. I rather T-Mo go it alone or have another respectable buyer.

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