As part of the government's remedy in the T-Mobile/Sprint merger, Dish Network is supposed to buy Boost Mobile for $1.4 billion, but so far, that deal hasn’t closed.
Analysts are asking: What’s up? And as usual when it comes to Dish and wireless, it’s complicated.
“We are unaware of why Dish has not closed the Boost deal,” wrote LightShed Partners analysts Walter Piecyk and Joe Galone in a blog post today. “It should have been done by June 1st. Something is up.”
The companies now face a July 1 U.S. Department of Justice (DoJ) deadline and T-Mobile continues to indicate it will close this quarter, they noted. “If T-Mobile is not delivering certain technical capabilities under the transition services agreement, the DoJ has the ability to compel them to do so,” the analysts wrote. “If Charlie Ergen is stalling or negotiating in bad faith, it also has the ability to compel Dish to close.”
Dish declined to comment on the status of the Boost deal. However, a spokesperson noted that it’s still well within the July 1 deadline, which marks 90 days since the April 1 filing of the government’s consent decree.
During Dish’s first-quarter conference call on May 7, Dish co-founder and Chairman Charlie Ergen said there are certain things that have to happen before it closes and mentioned cross provisioning as an example. When Dish owns Boost, it needs to provision all its customers and new customers on the T-Mobile network – rather than the Sprint network that Boost has been using.
“We don't necessarily want to go back and we don't want to necessarily put people on the Sprint network, and then have to go back and switch them later, and the cost of switching later to T-Mobile network...” Ergen said. Every time you switch a customer, “you have excess churn… So that condition hasn't been met yet,” and June 1 would have been the earliest it could close but that didn’t happen. “It could be July 1st,” if that condition wasn't yet met.
Dish & T-Mobile back at it
That’s not the only question on investors’ minds. Dish and T-Mobile have been unable to agree to terms on a 600 MHz spectrum lease as required by the DoJ judgement on T-Mobile’s acquisition of Sprint, the LightShed analysts noted. They now suspect the lease terms will be announced in conjunction with the closing of Boost, even though these issues are independent of each other.
They believe T-Mobile should be asking the DoJ for a 3-year lease of all of Dish’s 600 MHz spectrum at a rate of less than $350 million per year and noted that T-Mobile recently signed a 600 MHz spectrum lease deal with Columbia Capital, which the DoJ could use as framework for the spectrum lease deal with Dish.
“It’s not unreasonable to speculate that the motivation for T-Mobile’s deal with Columbia, which oddly lacked a right to buy, was to influence the DoJ process,” they wrote. “T-Mobile should also ask the DoJ to compel Dish to immediately close on the $1.4 billion acquisition of Boost Mobile.”
Analysts at New Street Research also are fielding questions from investors about Dish and noted that over the last decade, no company has generated more questions from investors, on both the market side and the policy side, than Dish. That has been true since Ergen started buying spectrum.
Among the questions: How will disputes between Dish and T-Mobile be resolved? “It is clear from recent filings that the momentary kumbaya relationship between DISH and TMUS during the final phase of the merger review has left and there has been a return to the more combative relationship that marked the first phase of the merger review,” wrote New Street policy analyst Blair Levin.
Investors have asked how disputes, particularly about various transactions and the MVNO, will be reviewed. The DoJ consent decree approving the deal appointed Ted Ullyot, former general counsel of Facebook, to be the monitoring trustee for the deal, Levin said. Ullyot will review all disputes and provide recommendations to the DoJ. “While the DoJ has the final word, as a practical matter, Mr. Ullyot’s recommendations are likely to become the DoJ decision.”
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Dish has been adding wireless industry talent to its management team and recently named former T-Mobile executive Dave Mayo as EVP, Network Development. As part of the merger remedy, Dish is to build a 5G network to compete with T-Mobile, Verizon and AT&T on a national scale. The MVNO deal with T-Mobile is for seven years and will enable Dish to bring in wireless revenues while it builds that network.
Last week, Wells Fargo Securities analysts said their meetings with tower company executives indicated they appeared confident that Dish was going to show up in a meaningful way this year, with one contact saying Dish has already signed “hundreds of leases.”