Dish, T-Mobile agree on largest parts of divestiture deal: report

Sources told CNBC that T-Mobile wants to limit Dish’s wholesale spectrum capacity to 12.5%. (FierceWireless)

Dish Network and T-Mobile have agreed on some of the largest components of a divestiture deal, but government officials remain concerned that the agreement isn’t enough for Dish to represent meaningful competition following a merger of Sprint and T-Mobile, CNBC reported today.

U.S. Department of Justice (DoJ) officials want T-Mobile and parent company Deutsche Telekom to sell assets like spectrum licenses and make other promises to help conserve competition in the wireless market, according to the report, which cites people familiar with the matter. Sources told CNBC’s David Faber that the T-Mobile side wants to limit Dish’s wholesale spectrum capacity to 12.5%.

Shares of Sprint were up 4.26% while Dish was trading up 1.61% and T-Mobile was up 1.07% after the report.

It's the latest in a process that has dragged on for more than a year, and looks to be ongoing through the fall as more than a dozen states filed suit to block the deal. As negotiations apparently continue at the DoJ, recent public filings show company representatives were still holding meetings with the Federal Communications Commission last month.

FCC Chairman Ajit Pai made it known in May that he was ready to sign off on a deal with certain conditions, including the divestiture of Boost Mobile, but the full commission has yet to vote on it.

In an ex parte filing (PDF) posted Monday, the parties revealed that senior regulatory staff for T-Mobile and Sprint met with the FCC’s general counsel team on June 17. Kathleen Ham, SVP of Government Affairs at T-Mobile, and Vonya McCann, SVP-Government Affairs of Sprint, and others met with the FCC General Counsel Thomas Johnson, Deputy General Counsel Ashley Boizelle and Joel Rabinovitz of the Office of General Counsel.

During the meeting, the company representatives discussed several issues raised in previous submissions and “relevant to the Commission’s competition analysis,” including the network improvements and efficiencies that the companies promise. They also discussed “the variety of participants in the wireless market” and the “relevant market definition, general framework for the competition analysis, and the FCC’s relevant authority under the Communications Act.”

RELATED: In T-Mobile/Sprint talks, getting to 4 sparks more questions than answers

The theme around competition is noteworthy given the concerns of DoJ staff about the market going from four to three facilities-based carriers, and the numerous reports that have Dish Networks in the works to create a would-be fourth player. CNBC last week reported that talks between Dish, U.S. regulators and Deutsche Telekom would continue into this week. Even though it’s been acquiring spectrum for years without building a network until recently, Dish is seen as a more attractive partner than a company like Amazon.  

Last week, New Street Research analysts pointed to what they considered one of the more interesting (PDF) ex partes in the merger proceeding. That filing noted that Sprint representatives reviewed “previously documented challenges faced by Sprint.” The analysts noted that they assumed the purpose of the meeting was to assist the FCC in writing an order that would help the companies in their litigation.  

RELATED: 'We’re in crazy town right now’: Boost founder Adderton

This week, the New Street policy team, led by Blair Levin, speculated that states may argue to the court that a trial date should be pushed back (from Oct. 7) because they weren’t given the precise contours of a transaction by June 28.

The New Street analysts also had some fun with the recent spate of news stories. They noted that for about the last month, “we have read almost daily reports that ‘the deal could be announced as early as today.’ Someday, this could prove true,” but like a lot of folks, they’re hoping it doesn’t ruin the July Fourth holiday, forcing investment analysts to “read complicated deal documents,” risking their ability to grill the hot dogs and chill the beer “to perfection.” The week of the 8th is a “far more patriotic week to announce a deal,” they said in a footnote.