Dish's Wireless Network, A Cornerstone of the T-Mobile Merger, Is Already On Shaky Ground
from the empty-promises dept
If you recall, the biggest downside of the $26 billion Sprint T-Mobile merger was the fact that the deal would dramatically reduce overall competition in the U.S. wireless space. Data from around the globe clearly shows that the elimination of one of just four major competitors results in layoffs and higher prices due to less competition. It's not debatable. Given U.S. consumers already pay some of the highest prices for mobile data in the developed world, most objective experts recommended that the deal be blocked.
It wasn't. Instead, the Trump FCC rubber stamped the deal before even seeing impact studies. And the DOJ not only ignored the recommendations of its staff, but DOJ "antitrust" boss Makan Delrahim personally helped guide the deal's approval process via personal phone and email accounts. Both agencies, and the vocal chorus of telecom-linked industry allies, all behaved as if all of this was perfectly legitimate and not grotesquely corrupt.
At the heart of the DOJ's approval was a flimsy proposal that involved giving Dish Network some T-Mobile spectrum in the hopes that, over even years, they'd be able to build out a replacement fourth carrier. As we noted at the time there was very little chance this plan was ever going to work.
One, Dish (and CEO Charlie Ergen) have a long history of empty promises in wireless. He'd been accused (including by T-Mobile previously) of simply hoarding valuable spectrum and stringing along feckless, captured regulators for years with an eye on cashing out once the spectrum's value had appreciated. Two, AT&T, Verizon, and T-Mobile are all heavily incentivized to make sure this proposal never got off the ground. Three, the current FCC has yet to stand up to industry on a single issue of substance, would never engage in the kind of nannying required to usher Dish's plan from pipe dream to major network.
But with the pandemic, it's not even clear we're going to get to that part of the program. Reports now indicate that the pandemic and quarantine may have scuttled Dish's plans for financing and deployment, even if Ergen hadn't been bluffing. The complaints are largely coming from unsourced Wall Street insiders, but they're certainly right that funding the T-Mobile merger's deus ex machina just got notably more complicated:
"Ergen, the billionaire chairman of satellite-TV company Dish Network, needs to raise about $10 billion to build a 5G network that covers 70 percent of the US population by June 2023, fulfilling his part of a regulatory agreement that allowed Sprint to be acquired by T-Mobile on April 1.
But with the coronavirus wreaking havoc on the economy and drying up lending, Wall Street is predicting Ergen will fall behind — fast.
“I think whatever rosy projections Charlie had are now very questionable,” said a source who expected to be part Dish’s lending group. “There is no financing to build a telecom network."
Some analysts still seem to think Ergen could pull it off. But again, they're the same analysts who ignored red flags about Ergen's history, and all of the greasy corruption required to bring this merger to fruition in the first place:
"Two months of severe market uncertainty doesn’t really alter my view of a company to execute on a three-year plan,” Lightshed Partners Analyst Walt Piecyk told The Post, saying it is too soon to question if Ergen will meet the deadline.
But even just a few months of delay could put Dish in a worse spot financially as it‘s already the clear laggard among the four wireless networks, making for a riskier loan profile, sources said."
COVID-19 certainly does make financing and building a major wireless network difficult. But if Ergen was bluffing all along, the crisis will provide wonderful cover for Ergen to back out of a deal. That said, even if the network somehow does get built and become a major wireless replacement for Sprint, analysis suggests the end network would result in around 100 million fewer people in range of service than if we'd left Sprint intact. And that's in an ideal, non-pandemic world.
Most objective experts knew this merger was a turd, and the Dish effort was doomed to failure with the slightest disruption likely throwing a wrench in the works. But we rubber stamped the deal anyway. And by nearly every metric, history will remember the entire saga as little more than greedy imbecile theater while consumers and employees share the brunt of the inevitable fallout.
Filed Under: charlie ergen, competition, covid-19, mergers, wireless
Companies: dish, sprint, t-mobile
