Dish Walks Away From Clearwire: Is T-Mobile U.S. Its Next Target?

by Trefis Team
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Quick Take

  • Dish withdraws its offer of $4.4 a share for Clearwire. Sprint will acquire rest of Clearwire for $5 a share.
  • Fourth largest wireless operator, T-Mobile U.S. could be the next target for Dish.
  • Dish informally approached T-Mobile in April this year before the latter acquired MetroPCS Communication.

In a high stakes bidding contest, Dish Network (NASDAQ:DISH) has folded its cards for Clearwire following the recent recommendation of the board endorsing Sprint’s (NYSE:S) recent bid of $5 a share. [1] Earlier, Dish had withdrawn its offer to acquire Sprint following the raised offer from Japanese telco Softbank. (See: Dish Folds Its Hand On Sprint But Ups The Ante For Clearwire)

Sprint will now be able to pick rest of 49% stake in Clearwire. On the other hand it would be interesting to see what does Dish plan to do now. While the company is left with limited options to explore, it may try to negotiate or partner with other players such as T-Mobile U.S.

See our complete analysis for Dish


End Of Clearwire Saga

Clearwire is Sprint’s wireless network partner and a key player in Sprint’s plan to compete against rivals Verizon (NYSE:VZ), AT&T (NYSE:T) and T-Mobile. Dish on the other hand is also looking to build a 4G LTE network. The company already owns some spectrum and it sees opportunity in the growing wireless market as the pay-TV business is saturated in the U.S. Dish first made an offer to acquire Cleawire at $3.30 a share beating Sprint’s offer of $2.97 a share. Later Sprint came up with a revised offer of $3.40 to beat Dish’s offer. This was not the end as Dish again came up with new offer of $4.40 a share, and finally lost to Sprint’s latest offer of $5.00 a share. [2]

Clearwire was an important target for Dish to pursue its wireless ambitions as it owns largely under-exploited spectrum.  Dish’s recent withdrawal opens the way for Sprint to complete its planned purchase of the 49% of Clearwire it does not already own. Clearwire shareholders are set to vote on the Sprint deal July 8. Sprint, SoftBank and Clearwire continue to wait for approval from the Federal Communications Commission (FCC) to complete their deals.

Could T-Mobile U.S. Be The Next Target?

Dish’s management has said that it is willing to spend billions to enter the wireless industry as a way to boost Dish’s revenue growth.  ((Dish Chairman Ergen’s Motives Questioned in Clearwire Bid, Bloomberg, Jan 10, 2013)) Earlier this year Charlie Ergen, Chairman of Dish, informally approached Deutsche Telekom AG about a possible merger with the T-Mobile U.S. Dish may try to resume talks and negotiate with the German giant. [3]

T-Mobile U.S serves approx. 43 million subscribers generating overall revenues of over $21 billion. [4] It has advanced nationwide 4G and 4G LTE network, which Dish will be interested in. T-Mobile’s market value has recently climbed 36% to $16 billion since it purchased MetroPCS Communications Inc.

If Dish were to acquire T- Mobile, it would become the fourth-biggest U.S. wireless provider. A Dish acquisition of T-Mobile U.S. may not bother regulators as it would not eliminate one of the top four U.S. carriers. Earlier, AT&T had to walk away from a takeover of T-Mobile in 2011 after regulators expressed concern about losing one of the industry’s largest companies and the resulting impact on competition. While the Clearwire story is over, it might well be beginning of a new chapter for Dish.

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Notes:
  1. DISH Network Announces Withdrawal of Clearwire Tender Offer, Dish Press Release, June 26, 2013 []
  2. Sprint, Dish and Clearwire’s Press Releases []
  3. Dish Is Said to Approach Deutsche Telekom About T-Mobile Bid, Bloomberg, Apr 13, 2013 []
  4. T-MOBILE AND METROPCS COMBINATION COMPLETE – WIRELESS REVOLUTION JUST BEGINNING, T-Mobile Media Relations, May 1, 2013 []
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