While a final deal for the T-Mobile/Sprint merger seemingly has been imminent for weeks now, CNBC reports that it’s coming down to “decision days” and next week may indeed be the make-or-break week for the $26.5 billion deal.
Citing unnamed sources, David Faber of CNBC said he’s been told that Deutsche Telekom (DT) is going to need to make a decision that comes down to one key issue—and it’s related to the cable industry. As negotiations continue over what would constitute a viable fourth competitor, the concern on the part of DT is that a cable company like Comcast or Charter would try to buy Dish Network and use T-Mobile’s network via an MVNO agreement.
Although no one is saying that in fact is imminent, it remains a concern for DT, according to the report—the big issue being that DT doesn’t want a big entity like Amazon or a cable company getting access to T-Mobile’s network for an extended period of time.
If the combined company is required to divest certain assets to Dish, part of that deal would involve a network sharing arrangement. Details of these talks haven’t been confirmed by participants, but one of the terms floated has Dish getting access to T-Mobile’s network for a period of three years through an MVNO arrangement.
T-Mobile, Sprint latest: If the parties do not settle next week, the Justice Dept. would sue to block the merger, sources say. But optimism remains that the parties could settle. (via @DavidFaber) pic.twitter.com/LAStqrTHpK— CNBC Now (@CNBCnow) July 18, 2019
Faber said he’s been told that either there will be a deal by next week resolving the network sharing issue or the DoJ will sue, effectively killing it, although there remains optimism that a deal can be done with T-Mobile majority owner DT’s endorsement.
The head of the DoJ’s Antitrust Division, Makan Delrahim, has said there’s no “magical number” in any particular market—referring to going from four to three competitors—but that indeed has been cited as a big reason for the opposition on the part of staff at the antitrust division, prompting talks of creating a fourth carrier in the guise of Dish.
FCC Chairman Ajit Pai already conditionally signed off on the deal, although it hasn’t yet come before the full commission for a vote. His approval includes the stipulations that Sprint’s prepaid division Boost Mobile be divested and that the New T-Mobile build out 5G in a large percentage of rural areas within three years of closing the merger.
The CNBC/Faber report prompted Wells Fargo Securities analyst Jennifer Fritzsche to comprise a note today to investors titled: “Could Cable Have Been The Wolf In Sheep's Clothing All Along?”
“Clearly the situation remains very fluid – but cable being the man behind the DISH black curtain may not be overly surprising after all,” Fritzsche wrote. “We have long thought that CMCSA and CHTR could move away from the MVNO it has in place with VZ. While VZ's fixed wireless push for 5G is still very nascent, if it does have success, one has to wonder why cable would continue to partner with a carrier which is actively trying to ‘uncable’ the cable providers' broadband pipe.”
Indeed, wireless carriers like Verizon, through the use of 5G and fixed wireless, increasingly have been entering territory long dominated by cable companies. T-Mobile also has promised to disrupt the U.S. in-home cable broadband market. At the same time, cable companies are trying to get a bigger footprint in wireless, including through their own MVNO agreements with carriers and via other ways like the emerging Citizens Broadband Radio Service (CBRS) space.
T-Mobile and Sprint and the states that are suing to block the deal agreed to an October 7 trial start date, but the states earlier this week said that date was no longer feasible since the companies missed a key deadline for disclosing complete terms of a deal.