Dish Network Corp.'s $26 billion worth of airwaves and national pay-TV service, if combined with T-Mobile US Inc., would create a formidable fourth player in the U.S. wireless market, said analysts at Moody's Investors Service and Macquarie Group Ltd.
Sprint Corp.'s decision last week to shelve its plans to combine with T-Mobile has thrust Dish from a sideline observer to a potential participant in the industry's wave of mergers. Dish, the second-largest U.S. satellite-TV carrier, has used acquisitions to assemble its own collection of airwave licenses, which could be used to start a wireless network or to help a current mobile-phone provider gain more capacity.
Combining with Dish could help T-Mobile get stronger in a market where Verizon Communications Inc. and AT&T Inc. together get more than 2.5 times as much wireless revenue as Sprint and T-Mobile combined. As an industry outsider, Dish wouldn't reduce the number of competitors in the market, pleasing regulators, and would bring its experience in video distribution as more consumers watch shows on mobile devices.
"The best potential for Dish to expand into the wireless business and develop a long-term solution to provide broadband to its video customers would be a controlling interest in T- Mobile," Neil Begley, a Moody's analyst, wrote in a note today.
T-Mobile spokeswoman Anne Marshall didn't immediately respond to a request for comment, and Dish spokesman Bob Toevs declined to comment.
In May, Dish Chairman Charlie Ergen said instead of bidding against Sprint for T-Mobile, he'd prefer to wait and be ready to pounce if the deal failed. T-Mobile shares have fallen 13 percent since last week, when Sprint owner SoftBank Corp. backed off its plans to combine the company with T-Mobile. Ergen said last week that Sprint's move increases Dish's "optionality," and he was studying what to do next.
"The waiting game paid off," Amy Yong, an analyst with Macquarie Capital USA Inc., wrote in a note today.
Yong estimated that Dish could pay about $35 a share for T- Mobile in a cash and stock offer. "A Dish/T-Mobile combo would be highly disruptive," Yong said.
T-Mobile, based in Bellevue, Washington, climbed less than 1 percent to $29.59 at 12:41 p.m. in New York. Dish, based in Englewood, Colorado, was little changed at $62.73.
One of the challenges to a Dish deal is making an offer that satisfies T-Mobile owner Deutsche Telekom AG.
If Dish were to put together an offer, it would probably be a combination of stock and cash, which is not quite the clean U.S. exit Deutsche Telekom is hoping for, Moody's Begley said.
"We believe DT wants cash," he said. Deutsche Telekom representatives didn't immediately respond to calls seeking a comment.
--With assistance from Cornelius Rahn in Berlin.
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