Dish looks to T-Mo­bile for fu­ture

Satel­lite-TV car­rier is said to be in talks on a deal that would ben­e­fit both firms.

Los Angeles Times - - BUSINESS - By James F. Peltz and Ryan Faugh­n­der

Satel­lite-TV car­rier Dish Net­work Corp. fi­nally may have found the merger part­ner it has been look­ing for, adding to the wave of con­sol­i­da­tion re­shap­ing the na­tion’s me­dia and tele­com in­dus­tries.

The Englewood, Colo., com­pany re­port­edly is in talks to ac­quire T-Mo­bile USA Inc. in a deal that would open a new vista for Dish and give T-Mo­bile a boost with un­used air­waves that Dish owns.

A pos­si­ble merger has long been a topic of spec­u­la­tion in an in­dus­try that is con­sol­i­dat­ing quickly to pro­duce ever-big­ger and fewer me­dia-tele­com play­ers to com­pete for con­sumers’ thirst for broad­band con­nec­tions and wire­less com- mu­ni­ca­tions.

A mar­riage of Dish and T-Mo­bile, based in Belle­vue, Wash., prob­a­bly would be a multi­bil­lion-dollar agree­ment. Be­fore trad­ing be­gan Thurs­day, Dish’s stock mar­ket value was $33 bil­lion and T-Mo­bile’s was $31 bil­lion.

Shares jumped Thurs­day af­ter the Wall Street Jour­nal re­ported the talks. Dish gained $3.44, or nearly 5%, to $74.25; T-Mo­bile rose $1.01, or 2.6%, to $39.34. Terms of a po­ten­tial deal were not fi­nal and an agree­ment might not be reached, the Jour­nal noted.

Dish Chair­man Charles W. Er­gen and his coun­ter­part at T-Mo­bile, John J. Legere, cer­tainly have been prais­ing each other’s work in tele­con­fer­ence calls and sep­a­rate tele­vi­sion ap­pear­ances re­cently.

An­a­lysts noted that in a con­fer­ence call last month, Er­gen re­sponded to spec­u­la­tion about a pos­si­ble tie-up or part­ner­ship this way:

“As you might ex­pect, we’re keep­ing all our op­tions open, but ob­vi­ously we ad--

mire what John [Legere] and his team have done at T-Mo­bile, and cer­tainly we fol­low what they do.”

A deal would help the com­bined com­pany of­fer a broader reach for wire­less cus­tomers of T-Mo­bile, the na­tion’s fourth-largest mo­bile car­rier. Dish, sec­ond to DirecTV in the satel­lite arena, ac­quired a big chunk of wire­less spec­trum in the lat­est auc­tion by fed­eral reg­u­la­tors.

“Peo­ple’s band­width needs are only go­ing to go up,” said Jef­frey Wlo­dar­czak, chief ex­ec­u­tive of Piv­otal Re­search Group. “Er­gen is sit­ting on a large amount of un­touched, at­trac­tive spec­trum that can be used by most play­ers in this in­dus- try.”

Even so, Wlo­dar­czak fig­ured that there was only a 30% to 40% chance the com­pa­nies would strike a deal, in part be­cause Er­gen is a “very tough ne­go­tia­tor.”

“Char­lie’s a poker player,” Wlo­dar­czak said. “He’s go­ing to want to get the full value of the spec­trum, and it has been dif­fi­cult for him to get deals done his­tor­i­cally.”

Dish and T-Mo­bile also might sim­ply not want to be left be­hind as their in­dus­tries con­sol­i­date, an­a­lyst Amy Yong of Mac­quarie Cap­i­tal said.

Amid the merger wave, “there aren’t that many op­tions left,” Yong said. “Peo­ple are part­ner­ing up left and right and it’s a process of elim­i­na­tion.”

The talks be­tween Dish and T-Mo­bile come on the heels of other merger deals among big play­ers in the TV, ca­ble, In­ter­net and wire­less mar­kets.

AT&T Inc. is in the process of buy­ing El Se­gundo com­pany DirecTV for $49 bil­lion. Char­ter Com­mu­ni­ca­tions Inc. last month agreed to ac­quire Time Warner Ca­ble and Bright House Net­works in sep­a­rate deals to­tal­ing $67 bil­lion.

Dish two years ago tried un­suc­cess­fully to ac­quire wire­less car­rier Sprint Corp.

Sprint, in turn, spent much of last year ne­go­ti­at­ing to buy T-Mo­bile, but the talks fell apart af­ter U.S. reg­u­la­tors in­di­cated they would block the deal.

Deutsche Telekom , the Ger­man telecom­mu­ni­ca­tions con­cern that owns 66% of T-Mo­bile, has been look­ing for years to sell or merge its stake.

T-Mo­bile, with about 44.7 mil­lion re­tail cus­tomers, posted rev­enue of $29.6 bil­lion last year.

Once a lag­gard in the wire­less mar­ket, T-Mo­bile has been grow­ing un­der Le- gere’s ag­gres­sive and un­ortho­dox lead­er­ship.

Legere low­ered prices, scrapped the stan­dard twoyear con­tracts and paid early ter­mi­na­tion fees for con­verts to T-Mo­bile. He’s also not above bad-mouthing his ri­vals on Twit­ter and else­where in public fo­rums.

But a prob­lem for T-Mo­bile and other wire­less car­ri­ers is that the mar­ket for their core busi­ness is sat­u­rated now that nearly ev­ery- one owns a cell­phone.

So car­ri­ers are seek­ing new op­por­tu­ni­ties out­side ba­sic wire­less sub­scrip­tions, and that’s lead­ing to in­dus­tries con­verg­ing.

Dish has spent bil­lions of dol­lars to li­cense space on wire­less air­waves, though it hasn’t been clear how the com­pany planned to use them. Yet buy­ing T-Mo­bile would let Dish put those li­censes to use with­out hav­ing to build a costly net­work of its own, an­a­lysts said.

In turn, a merger would pro­vide T-Mo­bile with more wire­less li­censes to bet­ter com­pete against mo­bile gi­ants Ver­i­zon Com­mu­ni­ca­tions Inc. and AT&T.

“There’s a fit in terms of get­ting Dish’s spec­trum used,” said Paul de Sa, an an­a­lyst at San­ford C. Bern­stein & Co.

The de­mand for wire­less con­tin­ues to grow as con­sumers in­creas­ingly use their mo­bile phones to watch video on the In­ter­net through ser­vices such as Net­flix, Hulu and YouTube. That in­crease in us­age has given im­mense value to Dish’s wire­less hold­ings, an­a­lysts said.

Dish, with 13.8 mil­lion satel­lite-TV sub­scribers and 591,000 In­ter­net sub­scribers, re­ported rev­enue last year of $14.6 bil­lion. Its largest mar­ket is Los An­ge­les, with about 500,000 sub­scribers.

David Becker

A MERGER would open a new vista for Dish and give T-Mo­bile ac­cess to Dish’s un­used air­waves.

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