The stereotype that the telecoms industry is run by shadowy grey executives has been hit hard by the battle for T-Mobile USA, in which three great maverick chairmen have so far engaged – first Masayoshi Son of Japan’s Softbank, then Xavier Niel of France’s Iliad, and now, by many accounts, Charlie Ergen of Dish Network.
Ergen is reported to have contacted TMo’s majority owner, Deutsche Telekom, to express his interest in acquiring the cellco, which recently rebuffed Iliad’s offer as too low, but also saw its former suitor, Softbank/Sprint, back away in the face of likely regulatory disapproval. Iliad is said to be looking for supporters for an improved big – private equity firms, but also possibly Google or Microsoft, both of which have an interest in disrupting the mobile status quo in the US.
Dish would be a good vehicle for that disruption too. It has made several attempts to fulfil its promise to build an LTE-Advanced network across the US, to create a quad play for itself – necessary to ensure its satellite business can remain in the premier league alongside the cablecos and telcos – but also, probably, to support new and potentially innovative providers on a wholesale basis. It has acquired its own spectrum from bankrupt mobile satellite operators, but it needs both more spectrum, and a network infrastructure partner, to make the business case viable. So it went after both Sprint and its Clearwire venture, losing both to Softbank, and now it may chase TMo as a consulation prize.
We have argued several times that Dish’s best bet would be to put aside recent hostilities and create a partnership with Sprint, rather like one the third cellco had planned with another LTE/satellite venture, LightSquared. Sprint was to host that now-bankrupt firm’s LTE roll-out on its Network Vision multi-technology, multi-operator infrastructure, and gain rights to share the start-up’s wholesale model as well as its spectrum.
Sprint could benefit from the content partnerships Dish would bring to an alliance (which it lacks when competing with AT&T and Verizon); and from replacing its old network and MVNO with the cablecos, lost to Verizon. But Dish may be more interested in full control, and that would make TMo a better target.
Sources told Bloomberg that Dish would be likely to make an offer after the November spectrum auction is over, which will provide a clearer picture of how the competitive landscape lies in the US. The AWS-3 auction will “tell us kind of where we stand on a baseline value as a company,” Ergen said on Dish’s recent earnings call, providing a “reset” for the industry by setting realistic values for cellcos airwaves. He said that, for that reason, it was unlikely Dish would make a deal with any other company before the auction ends.
Ergen may just be testing the waters, or trying to shake things up a bit, but if Iliad does come back with a better offer, he may have to move more quickly. However, Deutsche Telekom has rejected Iliad’s bid of about $15bn for a 56.6% stake, and may be holding out for its asset’s value to rise further – it has already gone up by about 24% in the past year amid repeated takeover speculation and strong performance under CEO John Legere (who has pledged to overtake Sprint next year in subscriber numbers courtesy of TMo’s aggressive ‘Uncarrier’ deals).