Dish could help T-Mobile and Sprint merge without spending a penny
The 2013 takeover battle between SoftBank and Dish Network to win the hand of Sprint was quite a drama. Finally, SoftBank won out and the company now owns 80% of the fourth-largest U.S. carrier. Six years later, Sprint is involved in another merger with more twists and turns than Thunder Mountain at DisneyWorld. While 13 state attorneys general and the AG from Washington D.C. have filed suit against the merger and a trial may not start until October, both T-Mobile and Sprint are awaiting the necessary regulatory approval from the Justice Department that will finally allow the merger to close.
But the DOJ won't give this marriage it's blessing unless the two wireless operators help spin off a new competitor to replace Sprint. Part of the DOJ's job is to make sure that consumers aren't being gouged by companies due to lack of competition in a specific industry. The merger would reduce the number of major wireless providers in the states by 25%. As it turns out, to help gain FCC approval for the merger, T-Mobile and Sprint agreed to sell the latter's pre-paid Boost Mobile unit. And apparently, Dish Chairman Charles Ergen is interested enough that talks reportedly started on a transaction estimated to be valued at $6 billion.
Ergen asks FCC for a favor in return for helping the T-Mobile-Sprint merger get DOJ approval
But Ergen supposedly wants to hold off on purchasing Boost, waiting to get a better price for such a purchase. Instead, Bloomberg reports that he has a better idea. He wants the FCC to eliminate a March deadline attached to some wireless spectrum that Dish bought years ago; under the terms of the acquisition, if Dish isn't using the airwaves by March, the company will lose the licenses belonging to the spectrum. So Ergen proposes that in exchange for that waiver, Dish will purchase additional spectrum, customers and assets from T-Mobile and Sprint. This way, Dish can be considered a new wireless competitor by the Justice Department allowing the $26.5 billion merger to close. Under this scenario, Ergen doesn't have to spend $6 billion for Boost Mobile.
"This is pretty weird, because Ergen has been attacking the deal, and Legere has been attacking Ergen and Dish. But now you have this situation where it could be that Ergen is the one guy who can bail out Legere, and Legere is the only guy who can bail out Charlie."-Blair Levin, analyst, New Street Research
In fact, one idea being floated would allow Dish to become a wireless player without spending any cash. This plan would have Dish send some of its spectrum to T-Mobile, and the satellite company would become a mobile virtual network operator (MVNO) using T-Mobile's network to provide customers with wireless service. It is the same type of scheme used by many others in the industry including Google's Project Fi and Comcast's Xfinity Mobile. Going this route would save Dish from having to spend billions of dollars to build a new wireless network from scratch. The only question would be whether the DOJ would consider a Dish owned MVNO a strong enough player in the industry to allow the merger to proceed.
The purchase of Sprint's Boost Mobile unit could pave the way for DOJ approval of the merger
If T-Mobile and Sprint aren't happy with Ergen's proposals, there are other companies believed to be interested in Boost Mobile. Cable firms Comcast and Altice are both said to be interested and Amazon also is believed to be looking at the situation.
FCC Chairman Ajit Pai already says that he is recommending to fellow commissioners that the merger be approved by his agency. He made that announcement after the proposed merger partners agreed to spin off Boost, freeze prices for three years following the closing of the merger, and cover 97% of the nation (85% of the rural population) with low-band 5G after three years. The approval from the Justice Department is one of the major hurdles that the merger needs to clear. There is also speculation that the judge overseeing the suit by the 13 states seeking to block the deal will issue a temporary restraining order. This would prevent T-Mobile and Sprint from closing on the merger until the trial ends.
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Things that are NOT allowed: