Dish Purchase Opens Door to Merger of T-Mobile and Sprint

Following weeks of negotiation, Dish Network has agreed to pay about $1.5 billion for T-Mobile and Sprint’s prepaid mobile businesses and about $3.5 billion for their spectrum. The deal’s terms prevent Dish from selling the assets or transferring control of them to a third party for a period of three years. The Justice Department is set now to approve the $26.5 billion merger of the two mobile phone carriers, said sources, which would position Dish to become the No. 4 wireless carrier in the U.S., replacing Sprint.

Bloomberg reports that “T-Mobile also is expected to reiterate that the economic terms of the Sprint deal, which it said would generate about $43 billion in savings, won’t be affected by the asset sale to Dish.”

T-Mobile and Sprint have been pushing for their merger to be approved for more than a year. Although FCC chair Ajit Pai recommended the deal be cleared, “the Justice Department has been harder to win over.” Justice Department antitrust head Makan Delrahim is in favor of an agreement “that would be a win for consumers and compensate for the fact that T-Mobile’s merger with Sprint would reduce the number of major players in the wireless industry to three from four.”

Under the terms of the deal, Dish “gets a seven-year wholesale agreement allowing it to sell T-Mobile wireless service under the Dish brand … [and] includes a three-year service agreement from T-Mobile to provide operational support as prepaid customers shift to Dish.” Even if the Justice Department approves the deal, however, the merger will be opposed by “a group of state attorneys general … [who] say the deal should be blocked because it will hinder competition and raise prices.”

The Verge reports that “maintaining the status quo of four competitors — even if T-Mobile and Sprint are allowed to combine — has apparently been a priority” for Delrahim and that “reaching this three-way pact with Dish is apparently enough to assuage his concerns.”

It notes the requirement that T-Mobile provide three years of operational support to prepaid customers “effectively prohibits a Google or a Comcast or an Amazon from quickly swallowing up everything that Dish is getting out of this deal and building out an even more formidable foe.” T-Mobile parent company Deutsche Telekom will “maintain majority control of the merged T-Mobile and Sprint if the deal is approved.”

FCC filings confirm that Dish chairman of the board Charlie Ergen has talked with both the Justice Department’s antitrust division and FCC’s Pai. Dish’s main business is satellite TV, but it “has long possessed a large amount of wireless spectrum” that could be worth $30+ billion. The company has “done very little” with the spectrum, leading to some criticizing it for “hoarding spectrum without any clear plan or purpose.”

Now, “with its pay TV business in decline — Dish lost 256,000 customers in the first quarter amid an ongoing carriage dispute with HBO,” the deal with T-Mobile and Sprint will “set the company on a whole different trajectory.”

Related:
U.S. Poised to Approve Merger of T-Mobile, Sprint, The Wall Street Journal, 7/24/19