Dish Network Seen as Favorable T-Mobile Suitor After Sprint's Failed Merger Attempt
Dish Network is poised to be a favorable suitor to T-Mobile, say Moody's analysts, and if the second-largest satellite TV provider in the United States makes a solid bid, it could make T-Mobile a formidable force in the wireless industry.
Dish Network currently owns around $26 billion in airwaves that could be combined with T-Mobile for a broader footprint and more investment potential.
"The best potential for Dish to expand into the wireless business and develop a long-term solution to provide broadband to its video customers would be a controlling interest in T-Mobile," said Moody's analyst Neil Begley.
The major problem, analysts say, is that Dish Network will most likely only be able to offer a cash-and-stock deal, while T-Mobile's parent company Deutsche Telekom AG would want cash.
T-Mobile currently lags behind No. 3 Sprint's 55 million subscribers with 50 million subscribers. Neither come close to Verizon's 122 million customers or AT&T's 116 million. The market separation where Verizon and AT&T get 2.5 times more revenue from wireless services than Sprint and T-Mobile combined has created a lot of buzz as to how to create the ideal third competitor.
This isn't the first time that Dish Network and T-Mobile have appeared in the same sentence this year. It was just in May that Dish Network chairman Charlie Ergen voiced that the company would be willing to step into the fray if government regulators ended up squashing a Sprint and T-Mobile merger.
"We don't have the kind of money to go outbid Sprint for T-Mobile or outbid AT&T for DirecTV. So we have to be well positioned so, no matter what happens, it's all good for us, and I think we're there," Ergen said at a first-quarter earnings report conference call.
"I wasn't a very good poker player, but when a bunch of drunken fools were throwing money around occasionally, I was able to pick up the pot at the end of the day," Ergen said. "My recommendation to our board would probably be let's see what happens."
Lucky for Ergen, it looks like his waiting game has paid off, and the ball is in Dish's court now.
Sprint and its Japan-based parent company SoftBank Corp. spent the year trying to drum up support for an acquisition of T-Mobile, but the company withdrew from the bid last week. Government regulators had frowned upon consolidating the third-and-fourth-largest carriers in the United States, fearing consumers would feel the lack of competition through higher prices and less options. Sprint chairman and SoftBank chief executive Masayoshi Son, however, argued otherwise.
"I brought the network war and price war [to Japan]. I'd like to bring that to the States," Son said at the U.S. Chamber of Commerce to industry officials in March. "I would like to provide an alternative to the oligopolistic situation that two-thirds of American households can only get access to one or two providers. I'd like to be a third alternative with 10 times the speed and lower price."
The argument is likely to be one Dish Network will bring to the table if it does try and take over T-Mobile, although Dish won't face the hassle of being a wireless carrier. Regulators will not see Dish Network and T-Mobile as scary as Sprint and T-Mobile, but they will also have to deal with one other variable: a $15 billion bid for T-Mobile by French carrier Iliad.
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