Implications of a T-Mobile – Dish Networks Merger

Dish Network, the satellite television company controlled by billionaire Charles Ergen, is in talks to acquire wireless telco T-Mobile US, according to people briefed on the matter.  T-Mobile US has a market value of $31 billion, while Dish Network is worth nearly $35 billion.  Details of the price, and the cash and stock mix, were still being worked out. Both Dish and T-Mobile declined to comment.

A merger of Dish and T-Mobile US would provide a definitive answer to what Dish plans to do with its huge wireless spectrum holdings, which Mr. Ergen has been adding to for years without revealing any clear plan for how Dish would use it. Speculation has persisted that DIsh would either build its own LTE or (true) 4G-LTE Advanced network – either on its own, or by acquiring a wireless network operator that had LTE/mobile broadband engineering expertise.

According to a Wells Fargo report, Dish’s full spectrum license collection is likely worth a total of between $40 billion and $44 billion. That figure includes Dish’s 700 MHz, AWS-4 and H Block licenses, as well as the AWS-3 licenses the company won in the FCC’s recent spectrum auction. (However, those AWS-3 licenses are somewhat in question because they are tied to Dish via the company’s two designated entities (DEs)–Northstar Wireless and SNR Wireless–which could pay around $10 billion in the auction for 702 licenses. Both regulators and Dish’s rivals have blasted Dish’s use of DEs–and the 25 percent small business discount they are to receive–as unfair).  It’s also worth noting that Dish’s spectrum portfolio could be worth as little as $28.1 billion or as much as $56.7 billion, Wells Fargo said, depending on buyers’ eagerness.

Following the close of the recent FCC AWS-3 auction, Dish commands an average of around 80 MHz of licensed spectrum nationwide, putting it just behind T-Mobile in terms of spectrum depth. Sprint leads in overall spectrum owned due to its extensive 2.5 GHz licenses, while AT&T comes in second place, Verizon comes in third, and T-Mobile comes in fourth (even though it acquired all of MetroPCS’ spectrum in May 2013).

NOTE:  Low-band spectrum can cover large geographic areas, while high-band spectrum can transmit larger amounts of data.  Therefore, buyers of licensed spectrum might only be looking for spectrum licenses that fit in with their overall network rollout strategy. The value of spectrum is directly tied to demand from actual mobile broadband users, and demand is a hard metric to calculate. But the rising value of spectrum was clearly on display during the FCC’s recent AWS-3 spectrum auction, which raised almost $45 billion in total gross bids–double even the highest forecasts before the event.

A merger would also give T-Mobile US a clear path to grow and continue its role as a market disrupter (“the uncarrier”), giving it both the spectrum and financial resources it needs to build out its mobile broadband network to cover more of the U.S. T-Mobile would be able to use Dish’s accumulated spectrum, adding more and faster broadband wireless service across the U.S. That, combined with the continuation of its industry-disruption pricing strategy, could turn T-Mobile into a real threat for Verizon and AT&T for the first time. As the proposed deal wouldn’t reduce the number of wireless carriers, regulators are likely to approve it.

Braxton Carter, T-Mobile’s chief financial officer, in March complimented Mr. Ergen’s push to accumulate unused licensed spectrum. “You look at what he is doing with some of his technologies, and that type of marriage could be very, very, very interesting, or partnership,” he said.

Implications for Real Time Mobile Video:

Finally, a merged entity would be a serious competitive threat to the combined AT&T-DirecTV merged company, because it would sell both satellite TV as well as mobile broadband/wireless voice service.  It would probably accelerate the trend toward delivery of REAL TIME MOBILE VIDEO, which both merged entities will likely pursue aggressively.

Here’s what DirecTV said about its acquisition by AT&T in a press release:

Creates Content Distribution Leader Across Mobile, Video & Broadband Platforms

  • The premier pay TV brand with the best content relationships now poised to deliver video to multiple screens – mobile, TV, laptops and more – to meet consumers’ future viewing and programming preferences
  • Unparalleled video content distribution scale in U.S. – nationwide mobile and video networks; broadband to cover 70 million customer locations with our broadband expansion


“DIRECTV is the premier pay TV provider in the United States and Latin America, with a high-quality customer base, the best selection of programming, the best technology for delivering and viewing high-quality video on any device and the best customer satisfaction among major U.S. cable and satellite TV providers. AT&T has a best-in-class nationwide mobile network and a high-speed broadband network that will cover 70 million customer locations with the broadband expansion enabled by this transaction.”

We can expect a very similar press release if and when the Dish/T-Mobile US deal is completed and announced.

In summary, a new Dish/T-Mobile, would be able to offer customers a full array of mobile Internet-based services along with its fast-growing “skinny-bundle” service called Sling TV.  The combined entity could provide mobile Internet, pay-TV and cell phone services resulting in a “poor man’s triple play.”  That’s because faster and more reliable wire-line broadband Internet wouldn’t be available from the new entity.   So it couldn’t justifiably compete with AT&T’s U-verse, Verizon’s FiOS, or Comcast’s Xfinity triple play.   However, we see tremendous competition in wireless only triple plays between Dish/T-Mobile and AT&T/DirecTV entities.