Six burning questions if T-Mobile, Dish Network actually get together


T-Mobile and Dish Network, two mavericks in their respective industries, could make for a potent duo.

The nation’s fourth-largest wireless carrier and second-largest satellite-TV provider are in talks to merge, according to The Wall Street Journal.

A deal would mark the latest combination of major players in the telecommunications and media industries. AT&T is awaiting approval of its $49 billion acquisition of satellite-TV provider DirecTV, while Time Warner Cable, Charter Communications and Bright House Networks intend to merge into a much larger No. 2 cable player.

A merger would bring together T-Mobile, which boasts 44.7 million retail customers and is on pace to surpass Sprint as the third-largest wireless carrier, with Dish, which has 13.8 million TV subscribers and 591,000 Internet customers.

Just as important, it brings together brash telecom CEO John Legere, whose “Uncarrier” campaign has been instrumental in turning around the company’s growth prospects, with Dish Chairman Charlie Ergen, the maverick leader of the satellite company known for his unpredictable moves.

“We suspect Legere and Ergen are having more fun than anybody at the moment,” said Jonathan Chaplin, an analyst at Newstreet Research, in a research note.

Dish declined to comment on the report. T-Mobile wasn’t immediately available for comment.

The combination is an intriguing one, but raises some questions. Here are the six most pressing ones.

1. So why would these two want to merge?

T-Mobile and Dish are both smaller companies facing much larger adversaries. While T-Mobile has shown impressive growth over the last year and a half, the company is still well behind competitors AT&T and Verizon. Verizon, for instance, has roughly twice the number of customers as T-Mobile.

Likewise, Dish has always played second fiddle to DirecTV, which is about to get even bigger once it combines with AT&T.

 

A combination between T-Mobile and Dish gives both companies options. The merged company could offer both wireless and television services, the same rationale used to justify the AT&T-DirecTV deal. Dish is also sitting on a valuable stockpile of spectrum, or wireless licenses that could greatly expand T-Mobile’s ability to offer faster and more reliable service.

Ergen, meanwhile, has been public about his desire to get into the wireless business. Dish has actively participated in spectrum auctions, and two years ago, made unsolicited bids for both Sprint and wireless provider Clearwire, which was eventually folded into Sprint.

It’s not the first time T-Mobile has attempted to get bigger; Sprint and T-Mobile were in talks to merge last year before regulators let it be known that they wouldn’t approve a deal.

There’s a financial incentive to do the deal as well. JP Morgan analyst Philip Cusick estimated in a note that the two companies could save $1 billion a year by merging their marketing and general expenses.

2. How will this affect me?

If the two get together, you could see bundles of aggressively priced services. T-Mobile and Dish could offer a comparable set of services that AT&T plans to offer with DirecTV. But as both T-Mobile and Dish in their respective field, you could expect the bundle to undercut the competition. The result: potentially cheaper television and wireless service for you — as long as you’re okay with both service providers.

If you’re not into traditional television, Dish also offers Sling TV, a service for cord-cutters, or people who have shunned paying for television service in lieu of online-based programming. Cusick said the demographics of T-Mobile’s younger customer base matches up well with the kind of customers who subscribe to a service like Sling TV.

3. Would a deal pass muster with government regulators?

Mergers and acquisitions aren’t getting through like they used to. Regulators nixed the idea of a combination between Comcast and Time Warner Cable in April, killed off any possibility of Sprint and T-Mobile getting together last year and stood in the way of AT&T’s deal to buy T-Mobile back in 2011.

But in all of those cases, the deals were struck between players in the same industry. This deal would be between a wireless provider and a satellite-TV company, which would be likely to get approval, according to analysts.

4. How does this change the wireless landscape?

If nothing else, Dish would give T-Mobile the ability to bolster its network coverage. That would provide a more legitimate alternative to Verizon and AT&T. While T-Mobile has made a lot of noise about the speed of its network, its coverage outside of the major metropolitan areas continues to lag well behind its larger rivals.

Dish’s spectrum would help T-Mobile augment its coverage is less densely populated area, giving consumers the ability to travel to more places and still tap into its highest speed LTE network.

Dish and T-Mobile would also make for an aggressive tag team in next year’s spectrum auction. The auction is poised to sell off what is known as low-band spectrum, which is appealing because it is able to travel across wide areas and penetrate through walls for better coverage inside buildings.

T-Mobile has signaled a willingness to participate in the auction. Dish, meanwhile, was the second-largest bidder in the last spectrum auction, which ended in January.

Longer term, with Sprint and a Dish-empowered T-Mobile competing against the larger rivals, consumers could see either lower prices or more attractive plans offering bigger data packages.

5. Can John Legere and Charlie Ergen get along?

If you think Legere is unpredictable as the CEO of T-Mobile now, wait until he starts working with Ergen.

Legere has made waves as the foul-mouthed, but candid leader of T-Mobile, actively trading barbs and hyping up his company on Twitter. He’s the public face of T-Mobile’s Uncarrier campaign, putting forth the notion that he and his company don’t act like the other wireless providers.

Ergen keeps a lower profile, but proved his aggressive and maverick streak with surprise bids for Sprint and Clearwire two years ago — attempting to barge his way into an existing deal between Sprint and Japanese carrier SoftBank. SoftBank ended up walking away as the majority shareholder in Sprint.

It’s unclear whether those two strong personalities would be able to work together. Ergen would reportedly serve as chairman and Legere as CEO. The Wall Street Journal noted that Ergen remains a “significant uncertainty.”

“The biggest challenge to getting this deal closed is…well, Ergen,” Chaplin said.

6. What happens to Sprint?

Industry analysts have long assumed that T-Mobile and Sprint would eventually get together, and comments by executives from both companies suggested consolidation was ultimately the best move.

But if Dish and T-Mobile get together, Sprint could lose out on a potential merger partner.

On the flip side, there were some who believed Verizon was interested in Dish for its spectrum holdings. Verizon could turn to acquiring spectrum from Sprint, according to Chaplin.

Verizon and Sprint declined to comment.

It may not all be negative. Ergen’s personality could lead some reseller customers to jump ship to Sprint, according to Kevin Smithen, an analyst at Macquarie Securities.

“Sprint will have value as the last remaining wireless independent asset in the US,” Smithen said

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