‘We Can’t Wait’ to Compete Against T-Mobile, Says Ergen; States Target His Credibility

State plaintiffs spent more than an hour of cross-examination trying to damage Ergen’s credibility as a would-be T-Mobile competitor by bringing up historical examples of allegedly bad Dish behavior or raising inconsistencies between his pretrial deposition and trial testimony. Asked why a bankruptcy court in the LightSquared case said Dish had a “troubling pattern of non-credible behavior,” Ergen said it was because the court didn’t believe Dish claims of LightSquared interference were credible. The evidence that since emerged “validated” Dish’s position, he said. Also brought into evidence were statements from then-FCC commissioner, now Chairman Ajit Pai criticizing Dish for having made a "mockery" of the designated-entity process during the AWS-3 spectrum auction.

Ergen exchanged texts and emails in May and June with DOJ Antitrust Division Chief Makan Delrahim, first about Dish’s concerns with T-Mobile/Sprint, later to discuss the possible remedy agreement, plaintiffs showed. Delrahim texted Ergen June 10, urging him to reach out to his “senator friends” so they could contact Pai and enlist his support for the department's remedy. Ergen testified he spoke to Sen. Cory Gardner, R-Colo., asking him to contact Pai. Ergen also spoke with Senate Majority Leader Mitch McConnell, R-Ky., but didn’t ask him to contact the regulator, he said.

Asked for the purpose of enlisting Gardner to lobby for Pai’s support, Ergen said the senator could be helpful because “he knows our company and he knows our plans.” That didn’t square with Ergen’s deposition, said plaintiffs, when Ergen testified he contacted Gardner because 5G is complicated technology that’s “not well understood” by the public or at the FCC, “not even by the chairman.” Courtroom spectators erupted in laughter when Ergen was asked whether the suggestion was that Gardner could educate Pai on 5G. The executive didn’t answer.

Plaintiffs appeared to probe Ergen about hints of possible DOJ improprieties. When Ergen was asked if Delrahim provided him with his personal email address, plus that of his DOJ account, he responded Delrahim had. But Ergen said he couldn't recall receiving any Delrahim emails from anything other than the DOJ account.

Ergen testified he grew “upset” June 22 when hearing “rumors” that T-Mobile went to the FCC to accuse his MVPD of acting in “bad faith” over the proposed DOJ remedy. The rumors said Ergen was demanding a $1 billion payment from Sprint as a condition for proceeding with the deal. With Ergen’s denial that he demanded such a payment, plaintiffs produced a June 27 email in which he asked for SoftBank’s help in procuring a $1 billion loan from JPMorgan.

There’s a “major distinction” between a demand for $1 billion cash and seeking help in procuring a $1 billion interest-bearing loan, testified Ergen. Enlisting SoftBank’s help for a JPMorgan loan “comes at a lower rate,” said Ergen. “We wanted to be sure we had plenty of money to buy Boost and continue to operate our business,” he said. “We had enough capital on our balance sheet, but we wanted margin.” Under redirect examination, Ergen admitted it was "probably not normal" to seek JPMorgan funding through a SoftBank intermediary, but that Dish had done so with DOJ's knowledge and approval.

In using the T-Mobile network for seven years, Dish will pay T-Mobile unspecified cents on the dollar for each Boost broadband customer it signs up, said Ergen. That won’t obviate each company’s desire to want to put the other out of business, he said. “Outside of mischief, they’ll be aggressive in the marketplace,” and so will Dish, he said. Of potential subscribers, “if they pay their bill, we want them to be a Dish customer,” said Ergen. “If they don’t pay their bill, we want them to be a T-Mobile customer.”

Asked by Judge Victor Marrero why Ergen originally opposed T-Mobile buying Sprint on “structure,” Ergen responded he didn’t want the market to go from four to three incumbents because it would “hamper” Dish’s entry into broadband. “The status quo was OK,” said Ergen. “Sprint was a bit stronger as a company 20 months ago.” It since has grown “less enthusiastic about the business,” having curtailed investment, and is laying off employees, he said.

On Dish’s broadband network buildout, “we’ve been working on this for 10 years,” said Ergen. He’s reminded, he said, of the saying attributed to Abraham Lincoln that anyone planning to spend six hours chopping down a row of trees had better spend the first four hours sharpening the ax. “We’ve got a pretty sharp ax,” Ergen said. “There’s a chance we fail. It’s a tough business out there, but we’re a tough company too.”

“Political intrigue that didn’t quite land for the states,” said New Street’s Vivek Stalam of Ergen’s text exchange with Delrahim about calling in senators. Ergen appeared strong on cross-examination by states in the face of tough evidence, the analyst wrote Wednesday after the executive finished testifying. The judge remained focused on possible conflicts of interest between Dish and T-Mobile since they would compete while the first would rely on the second's network.

Carriers “made progress” this week arguing Dish would be better than Sprint as the No. 4 wireless carrier, New Street Research’s Blair Levin wrote Wednesday before states cross-examined Ergen. “Sprint executives largely held up regarding Sprint’s difficulties and DISH’s CEO did a strong job of articulating his own plan.” A “big unknown” is what Ergen meant Tuesday when he hinted at talks between Dish and some top companies about the wireless play, the analyst emailed investors.

Ergen’s buildout plan is “modestly negative” for the tower industry, emailed New Street’s Spencer Kurn Wednesday. “We had modeled Dish building to 30,000 sites by 2023; however, it now appears that building to only 15,000 sites by 2023 is the most likely scenario.” He lowered to $300 million from $700 million his estimate for how much revenue Dish would bring to the tower industry by 2023.