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Approval for T-Mobile-Sprint merger could depend on Dish's mystery partner

Approval for T-Mobile-Sprint merger could depend on Dish's mystery partner
With the FCC and Justice Department signing off on the $26.5 billion merger between T-Mobile and Sprint, the only remaining obstacle standing in the way of the transaction closing is a trial that is currently playing out in a Manhattan courtroom. The plaintiffs are 13 state attorney generals and the AG of Washington D.C. who are seeking to block the merger because they say it will lead to higher prices. The states argue that reducing the number of major stateside carriers from 4 to 3 (a 25% reduction) will reduce competition in the industry.

The plaintiffs are not persuaded at all by the $5 billion deal that Dish has with Sprint that will make it the "fourth nationwide facilities-based network competitor" once the merger closes. Dish will acquire Sprint's prepaid businesses including Boost and Virgin Mobile and the 9.3 million subscribers that Boost has in the U.S. In addition, Dish will get 14MHz of Sprint's 800MHz spectrum, 7,500 retail locations, and 400 employees. It also will get the first crack at acquiring cell towers, networking equipment, and other wireless assets that Sprint will sell once the merger is official.

To allow it to hit the ground running, Dish will sign a seven-year MVNO agreement with T-Mobile which will allow it to sell wireless service under its name while building its own standalone 5G network. The plaintiffs argue that Dish Network and Chairman Charles Ergen are newbies in this industry and might not be able to replace Sprint if the merger is allowed. But former Sprint CEO Marcelo Claure told the judge on Monday that if the deal is blocked, the carrier will have to raise prices and borrow more money to survive.

The merger is likely to get the judge's approval if he believes that Dish will partner with a deep-pocketed partner

According to FierceWireless, the courtroom became electric yesterday when the lawyers discussed whether some of Ergen's testimony would have to be heard in private. That's because  Dish is reportedly in the midst of discussions with some big-name partners to help it enter the wireless industry. Dish has said all along that it would need a partner to help it build a wireless network that Dish says will cost it $8 billion to $10 billion. Ergen said in court that the company has three letters of credit for $10 billion each from three individual banks, Morgan Stanley, JP Morgan, and Deutsche Bank. A couple of names that have come up as possible partners are Google and Amazon.

Meanwhile, the attorney for T-Mobile parent Deutsche Telekom addressed the judge and said, "Your Honor ought to be aware of some of the discussions they’re (DISH) having with very exciting, very exciting potential strategic partners to work with them and to develop this product in a way that becomes a real serious competitive threat." And the attorney for Dish reportedly referred to these mystery partners as "some of the most successful companies on the planet." Yes, Google and Amazon would certainly fit that description.

New Street analyst Blair Levin says that the judge's decision might come down to whether or not he believes that Dish is in fact in discussions with some strategic partners. Levin stated that "We cannot know, nor can we guess what it means to be having 'discussions.' The big question to us is whether the judge looks at the confidential evidence and sees such discussions as likely to result in an actual deal or whether the evidence is more consistent with, in the words of a DT executive, 'another one of Charlie Ergen’s stupid bluffs.'" He added that if the judge believes that Dish will be able to enter into a partnership with a deep-pocketed partner, the odds of a ruling in favor of the T-Mobile-Sprint merger increase.

Ergen testified yesterday that Dish Network will be ready to replace Sprint on day one.

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