Why DISH Network Might Be Considering a Big Merger

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Why DISH Network Might Be Considering a Big Merger

By Brian Nichols | More Articles | Save For Later
November 26, 2014 | Comments (0)

DISH Network's (NASDAQ: DISH ) stock traded higher by a whopping 13% as the early success from the FCC's Auction 97 spectrum sale significantly increased the company's valuation. Investors might assume that DISH Network will now attempt to sell its AWS-4 spectrum -- which some estimate to be worth $20 billion -- to an eager telecom giant. However, there is another possible scenario, one that might be just as likely, if not more so.

Options galore for DISH Network
Currently, the FCC is auctioning its largest block of spectrum since 2008, and already, the FCC has earned proceeds of $24 billion in winning bids. This is a big deal because the FCC's goal was to create $10 billion throughout the entire auction process, which still has about three weeks remaining. As a result of this surprising demand, the value of spectrum assets has risen. That especially applies to DISH Network.

The FCC cleared DISH Network's airwaves for mobile and 4G use back in 2012, which gave DISH Network a spectrum asset valued north of $12 billion. But thanks to the success of Auction 97, DISH's spectrum is now valued north of $20 billion by some estimates.

Many investors believe that DISH Network will attempt to cash in on its asset and sell it to a telecom giant. After all, DISH Network was given a deadline to have 40% of its spectrum connected to mobile devices by 2017 when it was approved for mobile use. As of now, DISH Network has no mobile network, hence, DISH needs to strike while the iron is hot.

However, there is another option other than a sale of its spectrum. DISH Network management might want to acquire or partner with one of the four nationwide wireless service providers.

DISH's history implies wireless interest
First off, for a little history refresher: DISH Network made a $25.5 billion bid to acquire Sprint (NYSE: S ) before Softbank ultimately completed its acquisition. Then, when Sprint bid to acquire Clearwire, DISH Network tried to intervene.

DISH not only made a bid for Clearwire but also pleaded with the FCC to block the buyout by Sprint. At the time, Softbank hadn't completed its acquisition of Sprint, and there was a belief among analysts that Softbank wanted Sprint only if it came with Clearwire's spectrum. Softbank ultimately won this war against DISH and Sprint acquired Clearwire.

Therefore, DISH Network has shown interest in the past in acquiring a wireless service provider, which would combine spectrum assets and create a far better data usage experience for the combined company. That said, the best choice for either an acquisition or partnership looks to be T-Mobile (NYSE: TMUS ) .

Why T-Mobile?
First off, AT&T (NYSE: T ) is in the process of acquiring DirecTV (NASDAQ: DTV ) . Therefore, AT&T would have little need for DISH Network beyond spectrum. Furthermore, with AT&T moving into Mexico and DirecTV owning spectrum assets in Latin America, it appears that AT&T's DirecTV acquisition is an emerging-markets investment.

Assuming that Verizon (NYSE: VZ ) has shared interests to enter Mexico and Latin America, DISH Network would not fit that cause. Not to mention that DISH would be a difficult acquisition for Verizon, given the $130 billion that Verizon spent last year to acquire its remaining wireless business. Lastly, Sprint is already owned by Softbank and owns Clearwire's spectrum, making it an unlikely partner for Dish Network.

This leaves T-Mobile. DISH Network Chairman Charlie Ergen did say back in May that "T-Mobile would have strategic interest to us" if regulators blocked the deal between T-Mobile and Sprint. Furthermore, T-Mobile is a company that embraces a potential merger, having been involved in failed attempts with AT&T and Sprint.

Back in June, T-Mobile CEO John Legere said that the wireless industry is a "scale game" and that Verizon and AT&T are "hugely more powerful from a standpoint of scale and capital." Legere said he believes that T-Mobile can be "highly successful as a stand-alone company," but that a deal could accelerate growth. T-Mobile and DISH appear to be companies that could be willing to merge.

Furthermore, with T-Mobile's stock price falling 15% over the past six months, DISH Network now has the opportunity to make a bid at an attractive price.

Something else to consider
While T-Mobile wouldn't double its wireless service subscribers by merging with DISH, it would gain 14 million pay-TV subscribers and a way to combat the services of AT&T and DirecTV. Meanwhile, DISH Network would gain a growing wireless service provider, one that's gained at least 1.5 million net new subscribers in each of the past six quarters. Finally, the merger would create a much more efficient spectrum network, making T-Mobile's 4G network even more reliable for users.

It is possible that DISH Network will auction its spectrum in exchange for cash and capitalize on the demand. However, given Ergen's past interest in wireless service providers, his comments about T-Mobile, and Legere's history of attempted mergers, the more likely scenario is that T-Mobile and DISH Network hold serious conversations about merging

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http://www.fool.com/investing/gener...etwork-might-be-considering-a-big-merger.aspx
 
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Directv is being bought out by ATT. I'm sure Charlie wants to be the owner, and no way is he able to buy Verizon currently(not at a number that would benefit both parties), and almost positive he sure as hell ain't selling to Verizon.
 
Gee, TMobile. Why does it always seems like everything Dish does is second class? You would think Dish would try doing something with Verizon

DirecTV teams up with AT&T, not that I particularly like AT&T, but its a good solid company
In my opinion.......
I would imagine Dish would look at T-Mobile for their spectrum. Not the system itself.
T-Mobile's coverage is at best pitiful. If users are not within a few miles of a major highway or outside of an urban area, T- Mobile is almost useless.
 
They have gotten a lot better. I agree that Charlie would want the business model and spectrum, but buying them now would be perfect. They used to be the 4th of four companies, but is now rated 3rd. Past sprint up.
 
I used to have Tmobile but now use Consumer Cellular...get better coverage and a better price.
 
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Dish needs to buy T-Mobile (Charlie wants to stay in charge) then needs to expand the service to be a serious competitor to Verizon/AT&T-Directv. In the process they could acquire other cell providers to grow their footprint. They also need to invest in LEO satellites. They could at least extend their partnership with Sprint for the rest of the spectrum. If they have cellular and LEO in addition to GEO then that gives them more flexibility for offering triple play.
 
This has been talked about for the past 5 years.

I would lay odds on it, that this does not get approved. Charlie has pissed off enough people over the years, everyone is well aware and tired of the games.

All he does is string people along while he figures off how to benefit off the situation.
 
This has been talked about for the past 5 years.

I would lay odds on it, that this does not get approved. Charlie has pissed off enough people over the years, everyone is well aware and tired of the games.

All he does is string people along while he figures off how to benefit off the situation.
Seems to work for him. I'm going on record betting that he gets TMobile. We all almost knew Sprint wouldn't happen, but he needs an established mobile network, or one helluva game plan if he wants to start his own.
 
I have T-Mobile and would like the idea of it. It's the low frequency spectrum T-mobile needs for them to improve in rural areas. I'm glad they're finally dumping edge and upgrading that to 4g by the end of next of next year.


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