uploads///Dish Network

Dish Buys Wireless Assets to Push T-Mobile-Sprint Merger


Jul. 24 2019, Published 11:41 a.m. ET

Cable service provider Dish Network (DISH) has agreed to buy assets to help close T-Mobile’s (TMUS) and Sprint’s (S) merger. Dish is set to acquire the assets for around $5 billion, paying $1.5 billion for Sprint’s prepaid mobile brand, Boost Mobile, and roughly $3.5 billion for T-Mobile’s spectrum licenses. The cable company was earlier planning to pay $6 billion for the assets.

SoftBank, Sprint’s Japanese owner, saw its stock rise 3.2% after the news broke. Dish stock rose 3.37% on Tuesday but was down 2.87% today in pre-market trading. T-Mobile stock rose 0.62%, and Sprint rose 1.29% yesterday. Sprint is up 4.37% in pre-market trading today.

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Dish to become a fourth wireless carrier

Dish’s acquisition of T-Mobile’s divested assets would make the cable giant a fourth wireless carrier in the US. The company was building its wireless network even before it decided to purchase T-Mobile’s and Sprint’s wireless assets. It has been trying to gain T-Mobile’s assets for some time. However, T-Mobile and its stakeholder, Deutsche Telekom, were unwilling to divest the assets to a cable or technology company. They were reportedly worried about the divested assets being sold in the future.

Meanwhile, as part of the $5 billion agreement, Dish must not give away control of the assets for at least three years. The deal gives Dish the right to sell T-Mobile’s wireless service under the Dish brand for seven years. T-Mobile has agreed to provide operational support to Dish for three years.

A boon for Dish?

Dish Network has been losing customers for the past four years. Pay-TV subscriber numbers and demand have fallen amid cord-cutting, weighing on Dish’s subscriber base. DISH TV lost 259,000 subscribers in the first quarter, and Dish currently has over 12 million pay-TV customers.

Dish’s acquisition of T-Mobile’s and Sprint’s assets could open a revenue stream for the company and allow Dish to sell wireless phone services. Its revenue has fallen year-over-year in the past ten quarters, primarily due to its shrinking pay-TV customer base.

The deal’s massive spectrum portfolio was also critical for Dish. The company has acquired more than $20 billion in wireless spectrum over the years, but faces huge penalties if it doesn’t use that spectrum. Buying T-Mobile’s wireless assets could thereby help Dish avoid those penalties.

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The deal should satisfy the DoJ

The Dish-T-Mobile agreement could pave the way for T-Mobile’s and Sprint’s $26.5 billion merger. T-Mobile agreed to acquire Sprint, including its $32.9 billion debt, in April 2018.

The US DoJ (Department of Justice) was concerned about the merger. It was worried that it would remove one of the industry’s four mobile carriers, reduce competition, and hurt wireless customers.

The DoJ, therefore, wanted the companies to create a new mobile carrier by divesting their assets and spectrum. As the Dish deal would mean that there would still be four major wireless carriers, the DoJ could consent to the T-Mobile–Sprint merger.

Federal Communications Commission consents to the merger

T-Mobile and Sprint got the green light from Federal Communications Commission chairman Ajit Pai in May. The companies agreed to sell Boost Mobile and maximize 5G in rural areas. They committed to keeping prices low for at least three years after the deal’s closure.

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Merger hopes

The merger still faces challenges from state attorneys general, who filed a lawsuit in June to block the deal. They believe the merger could hinder competition and cost consumers more than $4.5 billion. The trial is set to start in October. Last week, a CNBC tweet revealed that T-Mobile and Sprint may have to settle their deal by July 29. However, the companies want to extend the deadline until their October court case.

T-Mobile–Sprint merger synergies

The T-Mobile–Sprint merger could boost the companies’ customer count. Both companies are struggling to grow their postpaid phone subscriber base. In the March quarter, Sprint lost net 189,000 postpaid phone customers, while T-Mobile gained 656,000. Verizon, the top wireless carrier, lost 44,000 customers, whereas AT&T added 80,000 postpaid phone customers.

The combination of the two entities is also expected to bring cost synergies—T-Mobile is expected to save about $43 billion after the merger. Further, the deal could expand the companies’ 5G wireless technology. They believe they would not be able to compete in 5G as standalone companies.


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