DOJ Decision May Come Soon on T-Mobile/Sprint
The big decision on T-Mobile/Sprint could be fast approaching. DOJ is expected to announce a deal with the companies soon or sue to block the transaction, industry officials said. The biggest questions appear to be whether Dish Network will follow through on a proposal to launch a fourth national network and whether there will be restrictions on other companies, especially cable operators, buying Dish for its spectrum.
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“DOJ understands that a weakness in the companies’ case against the states is that the companies are arguing that Sprint is not viable but that DISH, despite having fewer subs, less spectrum, no stores, etc, would be,” emailed New Street’s Blair Levin: “Adding a constraint on DISH's ability to raise capital (and any constraint on a sale is a constraint on raising capital) is a red flag for the court that the deal is structured to create something less than the competitive dynamic Sprint offered. After all, there is no constraint on Cable buying Sprint. Why should there be on DISH gaining a cable investment in its mobile enterprise?”
The biggest holdup appears to be concerns by T-Mobile parent Deutsche Telekom that “cable could partner with DISH through an MVNO and then take control of DISH in a more formal way (possibly through an acquisition; the company has not commented),” Wells Fargo’s Jennifer Fritzsche wrote investors. “Network capacity is no longer a concern -- seems all about control.”
Reports are that a fourth competitor would have a “right to use” T-Mobile/Sprint’s network, Craig Moffett of MoffettNathanson noted. “That sounds like a straight [mobile virtual network operator] MVNO agreement," he told us. "The problem is that there is no way anyone could argue that an MVNO agreement for Dish is anything more than a fig leaf fourth competitor. The only way to create a viable fourth competitor would be to give Dish a spectrum hosting deal. But I can’t imagine a scenario where Deutsche Telekom agrees.”
DOJ “has a tremendous opportunity to create a viable fourth competitor in the market if it creates the right framework that allows the future buyer to succeed in a highly competitive market,” said Recon Analytics' Roger Entner. The department should “stipulate rates that are sustainable in the long run, arrange a sensible framework regarding the Boost customer base, like renaming rights, and give any buyer full control over their slice of network, like what European MVNOs enjoy. If such a framework would exist, a whole series of buyers would champ at the bit to buy Boost.”
The deadline for completing the deal is July 29. Fourteen states have asked a court to block the transaction (see 1906210033).