Dish Network and T-Mobile Merger: Suitor at the Banks
Looks like another suitor for T-Mobile is lining up at the bank. Dish Network is currently seeking between $10 billion and $15 billion in loans to acquire T-Mobile, showing that a deal between the two is being seriously considered.
According to the Wall Street Journal, the $10 billion to $15 billion would be used to cover the cash portion of Dish Network's bid, with the rest in stock. T-Mobile's current majority holder, the German-based Deutsche Telekom AG, would be left with a large minority stake in the resulting company.
There's still no concrete number as to how many dollars Dish Network is offering for the nation's fourth-largest wireless carrier. T-Mobile currently has a market value of around $31 billion and Dish Network, which is the nation's second-largest satellite-television provider behind DirecTV, is valued at around $34 billion.
Both companies have not acknowledged anything officially, although both have also expressed interest in teaming up with each other.
And team up they must, they both argue, if they are to survive a less-than-ideal and hardly competitive marketplace ruled by behemoths Verizon and AT&T. T-Mobile, Sprint, and any other company looking to have an impact in the carrier industry simply don't have the pockets or infrastructure to compete with the Big Two, as T-Mobile CTO Neville Ray said in a letter to the FCC urging them to set aside more spectrum for the little guys.
"Without a reserve of at least 40 megahertz, AT&T and Verizon will be able to increase their low- band spectrum holdings, entrench their dominant positions in the wireless marketplace, and choke off any threat of competition in the future," writes Ray. "Verizon and AT&T have deployed networks in many areas of the country that would not be economically feasible without low-band spectrum's exceptional propagation characteristics."
It's here that economies of scale come into play. Sprint tried and failed in an attempt to convince U.S. regulators of this last year, but the concept here seems the same. Dish Network, looking to break into the carrier business, needs a leg in. T-Mobile, facing an uphill spending battle, needs deeper pockets and to expand its holdings. It makes sense, but regulators often point that there may be conflicts of interest or, as in the Sprint and T-Mobile case, less competition as a result of consolidation.
It remains to be seen whether Dish will be able to put up a good enough argument to government officials and T-Mobile execs, especially given the lack of success huge mergers have had recently. The only other one still up in the air is AT&T and DirecTV, which I would imagine, will have an impact on how Dish and T-Mobile's courtship plays out.
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