The Dish ‘fix’ for the T-Mobile-Sprint merger seems more short-sighted than ever

To sell regulators for their $26 billion mega-merger, T-Mobile and Sprint executives told anyone who would listen that the deal would yield near-miraculous benefits. But economists warned that US telecom merger promises are historically futile, and that reducing the total number of competitors would sooner or later lead to higher prices and job losses.

Instead of heeding their warnings and blocking the deal, US antitrust enforcers came up with a comprehensive solution: They would establish Dish Network as the new fourth major wireless provider in the country. Under the plan, Dish got some of the spectrum from T-Mobile, the prepaid brand Boost Mobile, and assurances that T-Mobile would help Dish run a Mobile Virtual Network Operator (MVNO) while deploying its own nationwide network. .

But the bickering between the companies culminated this week with Dish’s announcement that it would replace T-Mobile with AT&T as its primary partner, indicating that T-Mobile and Dish just didn’t get along and that the government was never that interested in helping. to force them.

“If T-Mobile can escape this regulatory obligation with impunity, what’s to prevent future consent orders from being ignored?” Hal Singer, an economist who testified against the merger’s approval, said: The edge.

Earlier this year, Dish called T-Mobile a “grinch” for shutting down its CDMA network earlier than Dish expected. In case of complaints state and federal regulators accused Dish T-Mobile of not fulfilling its merger promises, claiming the closure would risk leaving many of Boost’s 9 million wireless customers without service by 2022. T-Mobile has denied guilt, in effect accusing Dish of not understanding its own agreement.

So far, the Biden administration, which has been largely focused on Big Tech policy talks, hasn’t taken much action in the telecom space. The administration has yet to fully staff the FCC and only appointed a DOJ antitrust enforcement officer this week. Dish’s implementation goals are a long way off, and any meaningful government action, if any, is likely to take years.

The deal gives Dish until 2025 to roll out its wireless network to 70 percent of the population. Given that 70 percent of the US lives on about 3 percent of the country’s landmass, that shouldn’t be a particular challenge. (Dish hasn’t given any public indication yet that it’s approaching that goal yet.) But it’s reaching 95 percent coverage where Dish needs help, as the remainder lives at ten times the landmass of the original 70 percent.

That’s where Dish’s $5 billion deal with AT&T comes in handy the proposalAT&T will provide Dish MVNO customers with access to AT&T’s 4G and 5G networks in rural and more difficult-to-reach markets as Dish focuses on building its own 5G network in major cities. Dish will have access to T-Mobile’s network until 2027, but AT&T will now be Dish’s primary partner.

In a research note to investors, Wall Street analyst Craig Moffett argues that while Dish’s relationship with T-Mobile may have deteriorated, the deal with AT&T has likely increased Dish’s chances of survival as a wireless operator — for now.

“Under the T-Mobile agreement, Dish had until 2025 to comply with the FCC, but only two years after that to meet the much higher demands of customers,” Moffett said. “That was always the real challenge.”

Since AT&T has never offered CDMA access, the agreement does not resolve Dish’s complaints about T-Mobile’s decision to shut down its CDMA network, potentially adversely affecting Boost Mobile subscribers. AT&T, meanwhile, is making significant wholesale revenues with the dangerous gamble that Dish will never be successful enough to erode AT&T’s market share.

But with Dish Blooding wireless and tv subscribers at an alarming rate, the clock is ticking on Dish’s overall survivability. Over the next six years, Dish must remain financially viable, build a massive and popular next-generation wireless network, keep state and federal regulators happy, and somehow steal meaningful market share from a U.S. telecom industry that has historically been averse to meaningful distortion by competition.

It’s a big question for a company that has long been criticized – ao by T-Mobile in 2018 — for gobbling up a treasure trove of valuable spectrum and then failing to keep its promises to use that spectrum. While the government deal forbids Dish from selling its spectrum for six years, analysts have pondered over whether Dish will just lead the way from regulators, sell off his spectrum, and then use the huge profits to clear any remaining legal, regulatory and contractual obligations. to laugh.

Moffett tells The edge that Dish has already spent more than $10 billion on long-term cell tower rentals and is at risk of losing its spectrum, in addition to financial penalties for missing deployment targets. However, Singer remains unimpressed with the integrity of the merger agreement with the government and still believes an early exit from Dish remains possible.

“The decree always gave Dish an easy way out,” Singer says. “The real target of the regulation was T-Mobile. And now T-Mobile is slipping out.”

The saga can also end with AT&T buys Dish NetworkAT&T owning Dish’s vast spectrum, the US wireless industry is consolidating even further, and everyone involved acted like this never happened.

Meanwhile, other merger promises remain unfulfilled. T-Mobile’s promise that the deal would create new jobs – still to be seen on the company website – wasn’t worth much in the end. Despite claiming the deal “would be positive for jobs from day one and every day after that,” the company has eliminated 5,000 positions so far, as critics such as Singer predicted.

Historically, antitrust enforcers are expected to look at the available evidence of a proposed union and act accordingly. In the case of Sprint and T-Mobile, the Trump FCC approved the deal before you’ve seen impact analysisand Makan Delrahim, Trump’s chief antitrust enforcer, personally worked with all three companies to guarantee approval of the deal.

Rather than simply blocking the merger and finding a way to keep Sprint afloat, the resulting solution always required a great deal of optimism in both the integrity of the company’s merger promises and the competence of US regulators. Now consumers have to wait for a network that may never come, based on relationships that were sour from the start.

“Just like Delrahim scripted it,” Singer jokes.