Dish Network is trying to borrow at least $10 billion in preparation for a T-Mobile US bid, according to The Wall Street Journal. The report said that Dish is not on the brink of a bid, but is lining up financing in case the stars align.
As one of the largest holders of wireless spectrum in the United States, satellite TV provider Dish Network needs a way to put its spectrum to use. T-Mobile US is seen as a logical partner, as it holds less spectrum than the three other nationwide operators, but has managed to steadily increase its customer base with aggressive marketing and steep data discounts.
The biggest question many observers have about a Dish/T-Mobile US merger is whether T-Mobile US’ outspoken CEO John Legere could successfully report to Dish’s equally high-profile chairman, Charlie Ergen. Further complicating the chain of command would be the ownership stake of Germany’s Deutsche Telekom, which now owns two-thirds of T-Mobile US. According to The Wall Street Journal, DT would own a large stake in the combined company.
Clearly, a $10 billion to $15 billion bank loan would be just a fraction of what Dish would need to buy a stake in T-Mobile US, which has a current market value of $31 billion. Dish’s market value is only slightly higher, and the company is expected to use its stock as currency if a deal materializes.
One of Charlie Ergen’s goals in trying to fund a T-Mobile US takeover would almost certainly be boosting the value of Dish’s shares. Here he faces something of a catch-22: Right now investors are not valuing Dish’s unused spectrum the same way they value spectrum that is being monetized. But Dish needs a path to market in order to monetize its spectrum, and that may require a merger with an established carrier.
Another goal for Ergen will be winning the government’s blessing if Dish and T-Mobile US try to merge. Dish probably did not make any new friends at the Federal Communications Commission during the most recent spectrum auction, when it bid for spectrum through smaller companies that were eligible for discounts. Now the FCC may revoke Dish’s $3 billion discount.
John Legere may be a more welcome presence at the FCC, and he could pave the way for a possible deal. Earlier this week, Legere tweeted the following: “Just finished long day in DC with meeting and good discussion @FCC with Chairman @TomWheelerFCC.”
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