Uncertainty and delays tied to the merger of Sprint and T-Mobile are worse for Sprint and Dish Network than for T-Mobile, according to analysts at New Street Research.
That might seem clear given T-Mobile’s financial results as of late, but one often overlooked factor in all of this is that while the three affected companies all have an upside in winning at trial, they have different downsides in losing, said the team of analysts led by policy advisor Blair Levin in a note to clients over the weekend.
The analysts surmised that T-Mobile is going full steam ahead and executing on its plans, and “doing well while doing so.” Sprint, as one would expect with any company being bought, is having difficulty executing and can’t attract talent and invest long-term as long as the deal is pending.
“Dish wishes to proceed in a new direction, but the longer it takes the terms of its deals with T-Mobile and the FCC to be finalized, the more difficult it is for Dish to make the investments necessary to succeed in its wireless efforts,” the analysts wrote.
Sprint reported on Friday that its combined prepaid and postpaid phone net losses for the second quarter totaled 297,000, and its postpaid phone churn hit 1.78%. For its second quarter, T-Mobile reported 1.8 million net additions, up 11% year over year, and branded postpaid phone churn of 0.78%.
Dish, whose satellite TV business is declining, already put out a request for proposal (RFP) for its 5G network that it intends to build as part of a settlement reached with Sprint, T-Mobile and the Department of Justice last month. Dish told the Federal Communications Commission that it will deploy a core network and offer 5G services to at least 20% of the U.S. population by 2022.
Last week, a court ruled that the trial involving more than a dozen states opposed to the merger will be moved back to December 9 from the earlier date of October 7. That effectively gives the states more time to find things to assist their case, but the basic facts of the case that are likely to prove decisive, one way or another, are largely known, the New Street analysts said.
They also said the delay creates an issue for the C-Band proceeding, noting: “There are many issues at play in that proceeding, but we wonder: can the FCC feel comfortable deciding on certain issues, or whether there can really be any sales process with T-Mobile’s spectrum needs and the fate of 2.5 GHz band uncertain?”
FierceWireless reached out to a handful of analysts and industry observers about what the settlement with the DoJ might mean for T-Mobile and the C-Band spectrum, which has been the source of controversy for over a year. Opinions were mostly mixed; T-Mobile has been an active lobbyist in the proceeding for an FCC-led auction of the 3.7-4.2 GHz C-Band spectrum, and some expect its interest will continue unabated. But if it were to get all of Sprint’s 2.5 GHz spectrum as stipulated in the DoJ settlement, that would remove a lot of pressure to get mid-band spectrum elsewhere.
Of course, T-Mobile is not yet executing on its plan to build out a 5G network using Sprint’s 2.5 GHz spectrum until a deal is actually done, assuming it comes out on top in the trial or negotiations leading up to it. With Texas Republican Attorney General Ken Paxton joining the fray last week, the “political optics” for the states in pursuing the litigation now looks more bipartisan, and the more states that join the more difficult it will be to forge a settlement, the analysts noted. But Texas joining the case doesn’t change the law, the precedent or the facts to be presented.
In a statement, Paxton expressed appreciation for the time and effort that went into the agreement between the companies and the DoJ, but after careful evaluation of the proposed merger and the settlement, “we do not anticipate that the proposed new entrant will replace the competitive role of Sprint anytime soon.”
Paxton’s motives came under scrutiny almost immediately because AT&T is headquartered in Dallas, and speculation emerged that AT&T convinced its home state attorney general to join the suit. The thinking is, with Dish’s entry, that could increase AT&T’s opposition to a deal. Dish didn’t post blockbuster subscriber growth figures in the second quarter, but it did considerably better than AT&T’s DirecTV and DirecTV Now.
The New Street analysts said the important thing for investors is that Paxton’s motive is not really material to the outcome of the trial. “We have not seen any evidence that AT&T intervened to convince him to join the suit,” they wrote. It’s possible that it happened, but “we do not know of any case in which evidence of a competitor’s opposition proved decisive, or even material, in an antitrust trial but if we missed it, please let us know.”