Dish's Ergen singles out T-Mobile as potential wireless M&A partner

Dish Network (NASDAQ: DISH) Chairman Charlie Ergen held out hope that Dish could partner with erstwhile acquisition target Sprint (NYSE:S) and said T-Mobile US (NYSE:TMUS) is probably the last wireless remaining partner Dish could pursue a merger or acquisition with.

Speaking on Dish's second-quarter earnings conference call, Ergen spoke at length about Dish's wireless plans, but said there is no "deadline" for Dish to decide its wireless strategy. Dish tried and failed to land both Sprint and Clearwire this spring; SoftBank wound up taking control of Sprint and Sprint bought Clearwire, leaving Dish with more than 40 MHz of wireless spectrum but no partner.

"I think in an ironic sort of way, Sprint becomes a really kind of an interesting potential partner for us as well, and I think people just assume maybe that, that's not the case," he said, according to a Seeking Alpha transcript. "But the fact is, we actually understand Sprint and Clearwire probably better than we do any of the other wireless providers."

Ergen said Dish gained a lot of respect for SoftBank's executives in the bidding war and said that they are "very innovative and "very creative" and that SoftBank's ability to win Sprint over Dish proved to him that they might be good partners.

Ergen said that Dish still prefers to partner with an existing wireless carrier rather than build its own network. "Obviously, when you put networks together, to the extent that you can do that with an existing operator, or do that in a network sharing way, that's probably a preferred way to do it," he said. Ergen specifically mentioned T-Mobile as an option multiple times.

"I think there's still a lot of opportunity for us," he said. "And I think that opportunity--certainly, T-Mobile, you could put that together with Dish in a number of ways, including acquisition and merger, and that's probably not possible with the other wireless providers."

"So I think that there's a lot of optionality for us in the wireless business," Ergen added. "I don't think that has changed any. Unless you just look at a full-blown acquisition or a merger and really, that's probably only T-Mobile at this point in time."

T-Mobile CEO John Legere told the Wall Street Journal last month he was "intrigued" by Ergen's vision of combining the satellite company with a wireless carrier, but added that the two companies aren't talking.

Interestingly, Ergen said that bidding in an auction for the 1900 MHz PCS H Block "is not particularly attractive as things stand today." He said that auction would provide more uplink spectrum for Dish but that Dish needs more downlink spectrum, and that the technical rules the FCC made for the auction were designed to favor Sprint. "I mean, if you look at it from a big picture perspective, the way H Block is configured today and based on the rules, Sprint pretty much got the rules that they wanted for H Block," he said. "So I think it's very, very interesting to Sprint. And they're probably the one that's most likely to prevail there."

Meanwhile, Phil Falcone's Harbinger Capital Partners hedge fund sued Ergen for fraud, accusing him of secretly acquiring the debt of LightSquared in order to take control of the company and its spectrum assets. Falcone and Harbinger own 96 percent of LightSquared, which is in bankruptcy protection. Ergen is seeking to purchase LightSquared for $2.2 billion in bankruptcy.

"Because of our history as a satellite company, we understand that part of it a little bit better, and we think that fits together pretty well with what we're doing," Ergen said of the potential purchase of LightSquared. "So that's why we're interested in that. It's obviously a long-term play. It's obviously something that has a lot of hoops to jump through in terms of from a regulatory point of view and in terms of a technical point of view on the spectrum. So it's challenged, and if you could take a long view with that particular spectrum in my opinion."

Regarding Harbinger's lawsuit, Ergen said that, "I think that all I can tell you is that I personally followed all the rules. I think Dish has followed all the rules," he said. "We'll respond in the appropriate way." Ergen added: "We'll let the courts and the public opinion decide who is fraudulent and who is not."

For more:
- see this Seeking Alpha transcript
- see this WSJ article (sub. req.)
- see this Reuters article 
- see this separate WSJ article (sub. req.)
- see this separate Reuters article
- see this NYT article

Related Articles:
Dish: We likely won't 'meaningfully participate' in H Block auction
Report: Dish's Ergen could personally profit from LightSquared takeover
LightSquared lenders rally behind plan by Dish's Ergen to buy company
T-Mobile CEO hints at new prepaid plan, says he's 'intrigued' by Dish's vision
Analysis: Dish's options narrowing to T-Mobile, DirecTV

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