Dish May Bid For T-Mobile After AWS-3 Spectrum Auction

+102.58%
Upside
5.77
Market
11.69
Trefis
DISH: DISH Network logo
DISH
DISH Network

After Sprint (NYSE:S) withdrew its offer to acquire T-Mobile, Dish Network (NASDAQ:DISH) may consider bidding for the fourth largest U.S. mobile carrier. It has been reported that Dish may be interested in a deal after the November spectrum auctions. [1] Dish has amassed significant wireless spectrum in the past few years and has ambitious plans in the wireless arena. We estimate that Dish’s existing spectrum is worth over $20 billion. While the satellite company can explore several options, including launching its own wireless network, acquiring an existing carrier like T-Mobile would offer it a ready-to-use infrastructure for wireless service. Recently, France’s Iliad SA made a $15 billion offer for a 56.6% stake in T-Mobile. However, the offer was rejected by T-Mobile, which is ready to negotiate at a price of $35 to $40 a share as opposed to the $33 offered by Iliad [2]

Understand How a Company’s Products Impact its Stock Price at Trefis

Relevant Articles
  1. With Echostar Merger Approaching, What To Expect From Dish’s Q3 Results?
  2. Can Dish Network Stock Return To Its Pre-Inflation Shock Highs?
  3. Dish Stock Has Big Upside Potential To Its Pre-Inflation Peak
  4. How Will The Cyber Attack Impact Dish’s Q1 Results?
  5. Is Dish Network Stock A Buy Despite Many Headwinds?
  6. Will Dish Network Stock Continue To Underperform?

Opportunity In Wireless

Buying T-Mobile would allow Dish to offer video, high-speed Internet and wireless voice and data service across the country in one package. Currently, it offers video services but its satellite Internet service isn’t as fast as those from wired providers. The company wants to compete better in the saturated U.S. pay-TV market by offering a viable bundling option where it can combine its satellite service and wireless capabilities, and offer consumers a convenient option of a single subscription.

Dish sees this bundling potential as a growth opportunity, which is not readily available in the pay-TV market. Pay-TV penetration is currently very high, with more than 90% of the U.S. TV households subscribing. Given the saturation level and slowdown in the housing market, it is difficult to see significant growth in the U.S. pay-TV subscribers. Moreover, the rise of alternative video platforms such as Netflix (NASDAQ:NFLX) is adding to the woes of pay-TV operators. While the U.S. wireless market is also highly saturated, the demand for data services continues to increase and consumers are willing to pay for mobile Internet connectivity.

Why Would T-Mobile Make Sense For Dish?

T-Mobile U.S serves approximately 47 million subscribers, generating revenues of over $24 billion with a current market value of close to $25 billion. [3] It has an advanced nationwide 4G and 4G LTE network, in which Dish has significant interest. The most important part for both players is that the acquisition may not bother regulators, as it would not eliminate one of the top four U.S. carriers. Last month, Sprint had to walk away from a takeover of T-Mobile after regulators expressed concern about losing one of the industry’s largest companies and the resulting impact on competition (see Sprint’s T-Mobile Deal Called Off, CEO Replaced As Turnaround Efforts Pick Up). All eyes will now be on Dish and Iliad as they vie for T-Mobile, and it will be interesting to see how the story unfolds from here.

Why The November AWS-3 Spectrum Auction Is Important

In its November auctions, the FCC will invite bids for a total of 65 MHz of spectrum split into two sub-bands. One sub-band is 15 MHz of unpaired spectrum from 1695-1710 MHz, available as one 5 MHz block and one 10 MHz block, and two 25 MHz of paired spectrum from 1755-1780 MHz (uplink) and 2155-2180 MHz (downlink), available as three 5 MHz blocks and one 10 MHz block each. The FCC has set a reserve price for the 1695-1710 MHz band of around $580 million and $10.07 billion for the paired 1755-1780 MHz and 2155-2180 MHz bands. [4] While T-Mobile, Verizon (NYSE:VZ) and AT&T (NYSE:T) along with Dish have all expressed interest in the AWS-3 spectrum auction, Sprint has decided to stay away from it. [5] The November auction is important for companies such as Dish, as it would give a clear picture of the value of the existing spectrum held by the telecom operators. It is possible that the AWS-3 auction will raise the value of spectrum currently held by the wireless operators, and it will be interesting to see how this impacts the industry at large in the near term. It will also be interesting to see if Dish makes a formal bid for T-Mobile following the auction.

See More at TrefisView Interactive Institutional Research (Powered by Trefis)

Notes:
  1. Dish Said to Discuss T-Mobile Deal With Deutsche Telekom, Bloomberg, Sep 6, 2014 []
  2. Deutsche Telekom Said Open to T-Mobile Talks at $35/Share, Bloomberg, Aug 29, 2014 []
  3. T-Mobile U.S. SEC Filings []
  4. FCC sets rules for $10.5B AWS-3 auction; T-Mobile, Dish denied request to split spectrum, Fierce Wireless, Jul 24, 2014 []
  5. Sprint Says It Won’t Take Part in U.S. Airwaves Auction, Bloomberg, Sep 12, 2014 []