T-Mobile told a Washington, D.C., court last week not to grant Dish Network’s request for more time to purchase T-Mobile-s 800 MHz spectrum, essentially saying a deal’s a deal and other potential buyers are in the wings.
Earlier this month, Dish asked the U.S. District Court for the District of Columbia to give it 10 more months to get the financing together to buy T-Mobile’s 800 MHz spectrum for about $3.6 billion. Dish cited the Covid-19 pandemic, the war in Ukraine and other macroeconomic conditions that led to substantial inflation and rising interest rates since a Final Judgment was issued in April 2020.
The dramatic increase in interest rates made it significantly more expensive for Dish to finance the purchase of the 800 MHz spectrum licenses. Dish argued that refusing to modify the terms of the final judgment would harm the public interest because the spectrum is an important component of its 5G network. Dish announced in June that it met the FCC requirement to offer 5G to at least 70% of the U.S. population.
In its response last week, T-Mobile said Dish doesn’t need the 800 MHz spectrum to meet 5G buildout requirements and suggested the spectrum could be put to better use if it were sold to another buyer. Plus, T-Mobile told the court, it’s not a sure thing that Dish will have the funds to buy the spectrum in 10 months.
“Dish likewise offers no commitment to actually acquire the spectrum: It simply asks the court to kick the can down the road while it crystal-ball gazes about what the future might look like in June of 2024 when it may or may not purchase the spectrum,” T-Mobile told the court.
T-Mobile's 800 MHz costs
T-Mobile also said that Dish doesn’t argue that it is unable to obtain financing altogether or that it cannot obtain the spectrum without the extension. “It claims only that it cannot do so ‘responsibly.’ Dish does not need a modification to comply with the Final Judgment: it simply wants to extend its three-year option under the Final Judgment so that T-Mobile has to bear the carrying costs over the next ten months instead of Dish.”
The 800 MHz spectrum came to T-Mobile through the acquisition of Sprint, and T-Mobile already has decommissioned the vast majority of the 800 MHz radios in anticipation of the sale of the licenses. T-Mobile said it’s using the spectrum only enough to meet the needs for maintaining the licenses with the FCC.
The cost to keep and maintain the 800 MHz spectrum licenses for an additional 10 months would be at least $215.7 million, including about $6.3 million of direct expenses for network and equipment and about $209.4 million for T-Mobile’s cost of capital, according to the filing. “This exceeds the approximately $180 million in increased annual financing cost that Dish seeks to reduce somewhat by waiting to see if interest rates go down to the level they were at in 2020 in the next ten months,” T-Mobile said.
If Dish decides not to purchase the licenses after obtaining an extension, the value of the licenses at auction may be reduced because the licenses begin expiring in March 2028, with the vast majority expiring in June 2028, unless the holder of the licenses satisfies the FCC’s renewal requirements, according to T-Mobile.
Electric utilities standing by
Also last week, another potential buyer of the 800 MHz surfaced: Burns & McDonnell (B&M), a Kansas City, Missouri-based engineering company whose electric utility partners could use the spectrum to deploy wireless broadband networks. That’s in contrast to Dish’s suggestion that if the 800 MHz spectrum were to go up for auction, the most likely bidders would be AT&T and Verizon.
Both B&M and T-Mobile referred back to comments Dish made during its Q2 2022 earnings call where Dish Chairman Charlie Ergen said the 800 MHz spectrum would be “nice to have” but he didn’t say it was a “must have” for the company.
Citing prior cases, T-Mobile emphasized that modifying a Final Judgment is an “extraordinary remedy” that requires a significant change in circumstances. It also said the final judgment in this case precludes Dish from raising any claim of hardship as grounds for seeking to modify the terms and even without that clause, higher interest rates, whatever their cause, have always been a known risk of financing, so it’s not something that can be used to break this contract.
If Dish doesn’t buy the 800 MHz licenses, the Final Judgment directs T-Mobile to auction the spectrum within six months, subject to a reserve price equal to Dish’s agreed purchase price.