T-Mobile/Dish Announcement Likely Soon on $5B Boost Divestiture
T-Mobile and Dish Network are expected to announce a $5 billion deal Thursday that would give the MVPD 9 million prepaid subscribers through the carrier's divestiture of Boost, for $1.4 billion, plus 800 MHz spectrum from Sprint for $3.6 billion. Dish would get access to the new T-Mobile network as a mobile virtual network operator, said industry officials. T-Mobile is scheduled to release Q2 results Thursday, including a call with CEO John Legere.
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“Justice Department antitrust chief Makan Delrahim is trying to split the baby here by orchestrating a divestiture of Boost -- a prepaid brand with no cellular network -- to DISH, a satellite-TV company with no wireless customers, and a well-earned reputation for hoarding spectrum,” said Free Press Research Director Derek Turner. “This arrangement wouldn’t offer cellphone users a viable fourth competitor.” Other foes said they will comment when something is formally announced. The FCC and DOJ didn’t comment.
The companies must get past state attorneys' general lawsuit (see 1906210033). The deal would have to be approved by DOJ, which wants a fourth national carrier to replace Sprint (see 1906170051). The Wall Street Journal reported Wednesday Justice is expected to approve.
The department’s question will be whether Dish is “enough of a competitive threat to be a reasonable substitute for Sprint,” said Recon Analytics' Roger Entner. “You’re replacing one weak 50-million phone customer competitor with one one-sixth of its size” without a current network, he said: “Dish's core business, linear satellite TV service, is declining, which is probably limiting the company's breathing space when entering a very competitive industry.”
“We are at the 1 yard line!” Wells Fargo’s Jennifer Fritzsche emailed investors Wednesday: “This likely will offer enough evidence to the DOJ of a new 4th carrier. These concessions also significantly weakens the State AG case (which was most concerned with decreasing competition and rising prices).” Fritzsche said there are questions about whether Dish’s ability to use T-Mobile’s network will be limited.
AT&T CEO Randall Stephenson said on a call with analysts Wednesday (see 1907240053) the purported deal means continuing industry uncertainty. “There’s so many ‘ifs’ around industry structure and who is going to be in the market, who is not,” he said. If Dish gains wireless assets or T-Mobile/Sprint is completed “candidly, it doesn’t change anything we’re going to do for the next three years,” he said.
The agreement “may not clarify much with respect to the ‘market repair’ thesis for wireless; at least based on what we’ve heard so far,” MoffettNathanson's Craig Moffett wrote investors. The deal “sounds like something close to a straight [mobile virtual network operator] MVNO agreement, with a sidecar spectrum sale," he added: That "appears unlikely to placate the group of fourteen state AGs that have sued to block the deal, so the uncertainty about industry structure will continue.”