Dish Network (NASDAQ:DISH) stock rose more than 10% in pre-market trading on Tuesday. The stock rose more than 5.0% soon after regular trading opened. Dish stock rose due to news that the court approved the T-Mobile (NYSE:TMUS) and Sprint (NYSE:S) merger.
In December, a federal court in New York heard an antitrust lawsuit seeking to block the T-Mobile and Sprint merger. A coalition of more than a dozen states filed the lawsuit. They argued that the merger would reduce competition and hurt consumers. However, the court rejected the states’ argument. Instead, the court cleared T-Mobile and Sprint to proceed with the merger.
Sprint stock rose by more than 72% in pre-market trading due to news about the court’s approval. The gains continued into regular trading. The stock rose more than 72% in the early hours. T-Mobile stock rose by more than 10% in the early hours after positing a similar gain in pre-market trading.
Dish’s wireless venture could become a reality
Dish could benefit from the T-Mobile and Sprint merger. Specifically, Dish will use the assets that T-Mobile and Sprint will divest as a springboard for its wireless business. Among the assets that T-Mobile and Sprint will divest is a prepaid wireless brand with more than 8.2 million subscribers. The prepaid subscribers that Dish will inherit pay about $30 a month. The company will start with wireless operations that already make over $3.0 billion in annual revenue.
Therefore, the merger will help Dish jumpstart its wireless business. The company won’t have to start recruiting customers at the beginning. Comcast (NASDAQ:CMCSA), Charter Communications (NASDAQ:CHTR), and Altice USA started from scratch when they entered the wireless market.
As of the closing on Monday, Dish stock was about flat compared to where it stood when the company became part of the T-Mobile and Sprint merger deal on July 26, 2019. Uncertainty about the fate of the merger deal tempered investors’ appetite for the stock.
Dish’s legacy pay-TV business faltered
Dish is going into the wireless market as its main pay-TV business falters. The company’s legacy satellite pay-TV business has been losing customers, which caused its revenue and profit to shrink. Dish lost 66,000 customers in its legacy pay-TV business in the third quarter. Meanwhile, the revenue fell 7.0% YoY (year-over-year) and the profit fell 18% YoY in that quarter.
In December, Dish Chairman Charlie Ergen said that the company secured commitments from banks to finance the wireless business. The company needs $5.0 billion to purchase the assets that T-Mobile and Sprint will divest. Dish needs an additional $10 billion to build its own nationwide 5G network. However, the company only has about $2.6 billion in cash reserve.
So far, the stock has gained about 4.0% year-to-date.