T-Mobile Deal With Dish On Wireless Network Would Face Challenges, Say Observers

A proposal by Dish Network that it buy some T-Mobile/Sprint assets and launch its own fourth national wireless network likely faces an uphill climb, observers said Monday. The deal could help DOJ, which signaled it wants four networks regardless of whether it sues to block T-Mobile's buy of Sprint. It also would help Dish, which faces buildout deadlines on some of the massive amounts of spectrum it owns, and could have to forfeit licenses to the FCC.

Speculation grew after a meeting last week of Dish Chairman Charlie Ergen, FCC Chairman Ajit Pai and Chief of Staff Matthew Berry and DOJ Antitrust Division Chief Makan Delrahim. “DISH explained the need for a minimum of four nationwide mobile network operators (MNOs),” said a brief filing posted Friday in docket 18-197: “DISH also discussed the impact of the proposed merger on DISH’s market entry and its wireless buildout plans.” DOJ, the FCC, Dish and T-Mobile didn’t comment.

Mandating creating a fourth national carrier, when one already exists, “makes zero sense,” said Georgetown Law Institute for Technology Law & Policy's Gigi Sohn. “There are four competitors in the market now. Block this merger, there’ll be four competitors.” The proposal would create a “Rube Goldbergesque” solution for a problem that can be avoided, Sohn told us. Goldberg was an America cartoonist known for cartoons showing complicated gadgets.

Dish has been a leading opponent of the larger deal. Industry lawyers said other opponents are unlikely to come down too strongly against the proposal. Opponents, including the Communications Workers of America, Incompas and the 4Competition Coalition, didn’t comment Monday. Last week, states sued to block the transaction (see 1906110044). Earlier, the three FCC Republicans signaled they could support the buy after T-Mobile agreed to sell Boost, Sprint’s prepaid business, to a nationwide 5G buildout and other concessions (see 1905200051). DOJ held out for the sale of enough assets to start a new fourth network to replace Sprint (see 1905300058).

“Dish doesn’t need more spectrum, and while Dish buying Boost and/or Virgin may be important to the FCC, it wouldn’t do anything to help Dish actually put its own spectrum to use,” emailed MoffettNathanson’s Craig Moffett. “The only solution that would create a truly viable fourth competitor would be a spectrum hosting deal with Dish. But it’s not clear to me why [T-Mobile parent] Deutsche Telekom would be interested in agreeing to that.” A new provider like Dish, “with their spectrum hosted on T-Mobile’s and Sprint’s merged network, with lots of capacity, a heavily indebted balance sheet, and no preexisting [per-subscriber revenue] to protect, would be a disaster for the industry,” Moffett said.

“It would likely take more than just a standard MVNO [mobile virtual network operator] deal and some pre-paid customers to attract Dish and satisfy those concerned about the impact of the Sprint acquisition on competition,” emailed BTIG’s Walter Piecyk. Piecyk said the big question is Deutsche Telekom and Pai are willing to offer enough “to bring Dish into the deal, when the alternative is feeding off a weakened Sprint,” he said.

“Like so many data points in this process, this can be interpreted in many ways, but we read it to suggest that DISH will continue to oppose any deal that does not result in four nationwide operators, that it likely has proposed to the DOJ a number of terms that would result in DISH being that MNO, but that as of the meeting, no deal had yet been struck,” New Street’s Blair Levin told investors Monday.

Given the amount Dish spent opposing T-Mobile/Sprint, it seems clear Ergen is angling to operate a wireless network beyond the "minimalist" IoT narrowband network buildout going on now, said spectrum and satellite analyst Tim Farrar. But it's not clear Dish can do that alone and might need to partner with another company such as Amazon, with Dish spectrum assets being the core, he said. Such a partnership would solve some Dish challenges including whether its existing spectrum licenses that expire in 2020 get renewed, Farrar said. Bringing Dish spectrum assets into use in a more active way than IoT would make the FCC happy, and Amazon being part of it would raise the credibility of the idea, he said. Dish and Amazon didn't comment.

The deal could work for T-Mobile, if Dish uses T-Mobile’s infrastructure, said telecom consultant John Strand. If the model involves sale of prepaid assets “such as Boost and Virgin Mobile, along with network assets such as spectrum, retail outlets and MVNO-based network support for the divested assets,” it could be “a great deal” for both sides, he said.