Satellite network will pay $5 billion for divested assets to form new wireless carrier
The mega-merger of T-Mobile and Sprint took a step closer to fruition with Dish Networks reportedly agreeing to pay $5 billion for assets and spectrum to form a new wireless carrier – with certain limitations. The deal will likely satisfy demands by the Justice Department, which wants to reduce the chance of the $26.5 billion merger negatively impacting consumers.
The Lowdown: The deal, months in the making, will reportedly have Dish buy the Boost Mobile pre-pay cellular business from Sprint for $1.5 billion and a range of wireless spectrum for $3.5 billion. The two assets combined with existing spectrum already owned by the satellite television service provider are enough to form a substantial new wireless carrier.
The Details: Since the details have not yet been finalized, some terms of the deal remain unclear – whether Dish, for example, will have access to the new T-Mobile wireless network for carrying its service to uncovered parts of the market. Published reports indicate that the deal restricts Dish from selling its wireless business to a third party for at least three years. The potential for a sale to a stronger third party, such as Comcast or Google, is a major concern for T-Mobile and its parent company, Germany-based Deutsche Telekom.
The Impact: The marriage between T-Mobile and Sprint will reshape the wireless industry. If approved, T-Mobile will become the second-largest wireless carrier in the United States, just behind Verizon and ahead of AT&T. The consumer market will feel the impact of the deal first, as T-Mobile – which is already the fastest growing of the four major providers – will have greater market power to take on its rivals. The deal will impact businesses, too, as the major wireless providers are actively plying the evolving Internet of Things (IoT) and 5G networking segments. AT&T, Verizon, and T-Mobile are actively pressing channel partners into service to help develop their B2B markets.
Background: T-Mobile and Sprint announced their merger plans in 2017, saying combining the companies is necessary to reduce costs and maintain competitiveness. T-Mobile estimates that the combined companies will save more than $43 billion in cost reductions and resource optimization. But the deal still faces stiff opposition from several states’ attorneys general, which are suing to block the deal out of concerns that it will lead to higher prices. The merger already has the approval of the Federal Communications Commission.
As recently as two weeks ago, the deal appeared to be in jeopardy, as it didn’t look like T-Mobile could reach acceptable terms for the divestiture. T-Mobile’s parent company, Deutsche Telekom, expressed concern that another company could leverage the new, weak wireless provider to undercut the benefits of the merger.
The next deadline for reaching an accord on the deal is July 29.