In the consolidating wireless and communications industry, investors and analysts have long believed satellite TV giant Dish Network and its billions in wireless spectrum is a crown jewel asset for the growth hungry sector. With the likes of AT&T T +0.63%, Verizon, Comcast CMCSA -0.67% and Sprint unable to digest another mega acquisition, a potential partnership between Dish and T-Mobile is now seen positively by Wall Street.
|T-Mobile And Dish Network Merger|
On Wednesday evening, The Wall Street Journal reported that Dish and T-Mobile have begun merger talks in a prospective merger that would combine the nation’s second largest pay TV operator with the fourth largest wireless carrier nationally.
The deal would partner Dish chairman Charlie Ergen, a savvy satellite TV pioneer who snapped up billions of dollars worth of spectrum assets in bankruptcy courts ahead of a spike in data usage with the adoption of smartphones with T-Mobile CEO John Legere, a self-proclaimed industry disruptor who’s used a price war to steal virtually all of wireless industry’s subscriber growth over the past 24-months. Ergen, the WSJ reported, would be chair of the combined company, while free-wheeling Twitter addict, Legere, would be CEO.
A merger would help T-Mobile round out it spectral assets with the combined company having positions of 16MHz of 700MHz spectrum — 10MHz from T-Mobile and 6MHz from DISH — in addition to 40MHZ of PCS spectrum and 109MHz of AWS spectrum, according to an analysis from Evercore Partners. It would also give the combined company the customer base to begin looking into ideas like mobile broadband and quadruple play packages that have been talked about in the industry for years. Although Dish may ask for a price north of $60 billion, wireless network synergies and potential operational efficiencies mean a deal likely would come with forecasts of earnings and cash flow growth.
Other than the financial aspects of the deal, what’s most appealing is its limited antitrust risk, especially when contrasted with recent M&A in the wireless and communications industry.
AT&T set off a wave of wireless consolidation after it failed to win antitrust approvals for a $39 billion takeover of T-Mobile. Once that wave was completed, Sprint and T-Mobile then began floating the notion of a merger, only to receive clear push back from the FCC and Department of Justice. Most recently, a nixed merger of Comcast and Time Warner Cable TWC -0.22% underscores regulators’ seriousness in overseeing industry consolidation.
But a Dish and T-Mobile merger would hold few antitrust risks, according to Evercore analysts. “In the wake of the failed CMCSA-TWC merger, there will be some concerns about the regulatory environment. However, we do not see any significant hurdles and note that issues around spectrum ownership depth in certain markets (which is not a given) are usually addressed through divestitures,” they write.
Evercore believes a combination of Dish and T-Mobile will benefit both companies shares. It could also positively impact cellular tower stocks such as SBA Communications SBAC +3.56% and Crown Castle. “We would be buying towers today as we see this combination as a positive for the group,” Evercore writes, noting that Dish would likely want to build out a rural wireless network where T-Mobile is limited.
T-Mobile shares were rising over 4%, while Dish shares were rising nearly 6%. SBA shares were rising over 3.5% and Crown Castle shares were up nearly 2%.