Dish Network and T-Mobile US are reportedly in merger talks as the US telecoms and media sectors continue to see game-changing deals, although analysts say there is still plenty of time for other potential suitors to step in. The country’s…
Dish Network and T-Mobile US are reportedly in merger talks as the US telecoms and media sectors continue to see game-changing deals, although analysts say there is still plenty of time for other potential suitors to step in.
The country’s second-largest satellite TV operator and fourth-largest mobile operator agree on what the form the merged company would take, the Wall Street Journal reported.
Dish founder and CEO Charlie Ergen would become the chairman, while T-Mobile head John Legere would be CEO.
Such a deal would have strategic advantages for both sides. Dish would be able to boost its broadband service and make use of the billions of dollars’ worth of wireless licences it has amassed, while T-Mobile would gain subscribers better enabling it to compete with much larger rivals AT&T and Verizon.
The price tag and precise combination of cash and stock that would be used to fund the deal are yet to be decided, the report said, and the talks were described by one source as still at “the formative stage”, meaning a deal may not necessarily ensue.
Hints of a future Dish-T-Mobile merger have been around for some time. In February, Ergen said the company was still looking to acquire or team up with a wireless carrier such as T-Mobile to add to its assets. Dish had looked at acquiring T-Mobile in 2014 and, the year prior, made unsuccessful bid for its rivals rival Sprint and Clearwire.
Legere has also hinted at the possibility of a Dish-T-Mobile tie-up, describing the DTH operator, also in February, as “a great opportunity, both for the country and possibly T-Mobile”.
If successful, the merger would be the latest in a series of mega deals that are changing the face of the US telecoms and media sectors.
As reported yesterday, incumbent telco AT&T is said to be close to securing regulatory approvals for its US$48.5bn acquisition of Dish’s great rival DirecTV, while cableco Charter Communications recently agreed to buy Time Warner Cable and Bright House Networks in deals which would create the country’s second-largest cableco behind Comcast. Meanwhile, French billionaire Patrick Drahi’s telecoms group Altice is keen to add to its newly-acquired US cable asset, Suddenlink.
Talks may provoke others to launch bids
Pointing to Ergen’s history of failing to close deals, New Street Research analyst Jonathan Chaplin said he believes news of the Dish-T-Mobile talks will prompt other potential suitors for both firms to take action.
“We suspect the other three carriers, a couple of cable companies, two unpredictable French billionaires, and a Lebanese Mexican have all just kicked their bankers out of bed,” he said, noting that about half of these are involved in other deals or have had deals recently collapse, which would make it harder for them to mount counter-bids.
Chaplin said he believes Dish is the more undervalued of the two assets at present, but noted that T-Mobile, majority owned by Deutsche Telekom, is the target in this potential deal and has more alternate suitors.
New Street analysts have previously predicted that Dish might buy T-Mobile, at US$45 per share, funding the deal with relatively equal amounts of cash and stock. In their view, such a deal would have a 50/50 chance of being completed, considering the parties involved and the “decent” odds of rival suitors emerging.
Operators most likely to be affected by the potential merger, in Chaplin’s view, are Verizon and Sprint as the former would derive a lot of benefit from Dish’s spectrum, while the latter needs to boost scale and improve its network. Comcast, America Movil, Altice and Iliad are also potential bidders for T-Mobile, while the most obvious alternate suitor for Dish is AT&T, in his view.
Following Ergen’s meeting with analysts and investors in Denver yesterday, Wells Fargo analyst Marci Ryvicker said in an investor note that she believes Dish will choose one of four options: a partnership with a wireless operator, an acquisition of a wireless carrier, a wholesale lease or leases, or a sale of all or part of the business. Ergen was clear that the four options are not mutually exclusive, she stressed.
Ryvicker said in the note, published before news of the potential Dish-T-Mobile merger broke, that she considers an acquisition of a wireless player the most likely option, with T-Mobile, Sprint or both as the most likely partners.
AT&T may accept net neutrality to close on DirecTV buy
Elsewhere it seems DirecTV’s US$48.5bn sale to AT&T is getting closer to the line. AT&T is reportedly expected to accept new FCC rules on net neutrality to win approval for the takeover.
Analysts predict that the FCC and Department of Justice will approve the deal, subject to conditions, in a matter of weeks.
Such a move, reported by the Washington Post, would be an about-turn for AT&T, which was among groups to file lawsuits against the FCC for its controversial new net neutrality rules.
It has been suggested that AT&T may now agree not to throttle or block internet content, or to take part in paid prioritisation. It is unclear how long these conditions would remain in place, the report stated.
Last month, Dish Network, Cogent Communications and consumer advocacy groups met with FCC officials to discuss conditions for the AT&T-DirecTV merger. They set out their preferred conditions, which include requiring AT&T to offer customers standalone broadband access at reasonable speeds and prices, and not forcing them to buy bundled packages.
They have expressed concerns that the merger will give AT&T greater incentive to favour its own video services for the benefit of bundle customers, and also to thwart competing OTT services.
Earlier this week, the Competitive Communications Associate (COMPTEL) filed an ex parte notice with the FCC arguing that the merged AT&T and DirecTV would be large enough to negotiate significantly lower rates with programmers for content, leading to higher fees for smaller operators.
Meanwhile, AT&T executives are set to visit Brazil the week after next to meet with high-level officials, local publication Teletime reported. The agenda will reportedly include both the planned merger with DirecTV, which controls Sky in Brazil, and AT&T’s potential purchase of 2.5 GHz and 700 MHz spectrum in an auction later this year. The US telco could also show interest in buying a Brazilian operator, the report stated.
