The T-Mobile/Sprint merger is (almost) complete, having passed the major hurdle of gaining approval from the Department of Justice (DoJ) on Friday. As part of the deal, Dish Networks has emerged as the new “number four” carrier, and is spending $5 billion to purchase Sprint’s prepaid assets, notably Boost and Virgin, as well as a swathe of 800 MHz spectrum from Sprint. It is, without a shadow of a doubt, a major victory for T-Mobile and Sprint.
Let’s consider what they need to sell to Dish. The spectrum appears to be the 800 MHz range that Sprint acquired when it purchased Nextel in 2005. If that’s the case, it’s not broad bands of spectrum that carriers usually enjoy, but rather Specialized Mobile Radio bands that are combined together, which makes it a little more difficult to use. If the new T-Mobile had to lose some spectrum, this is the best to lose: the company retains its 6-700 MHz needed to deploy 5G into rural markets, as well as its millimeter wave spectrum that should form the basis of its super-fast, low-latency 5G network that everyone likes to talks about. More importantly, the new T-Mobile picks up the 2.5GHz spectrum from Sprint that will be invaluable for creating a more realistic high-speed 5G. Win/win.
Consider too the consumer mobile assets that the new T-Mobile is losing: Boost and Virgin are, in my opinion, struggling businesses that are losing ground to the new-wave prepaid of Cricket and Metro (by T-Mobile). Again, if something had to go, this is the customer base to lose. Admittedly, it’s not an insignificant number of subscribers – an estimated 9.3 million – but they are unlikely to provide a high average revenue per user and are – because they are prepaid – far more likely to churn to an alternative carrier.
Finally, let’s consider the new fourth carrier: Dish Networks. Dish has been picking up spectrum for several years now (it has spent roughly $20 billion acquiring it all), but has apparently balked at creating a mobile network until now. The good news is that Dish has a few years to figure that out: the deal includes the right to use the new T-Mobile network for seven years while it builds out a competitive solution. Having said that, under the terms of the deal with the DoJ, Dish must have a network in place that covers 70 percent of the U.S population by 2023. Further, Dish will have to look to expand its consumer base rapidly to make such a major undertaking cost effective. That will be a challenge in today’s competitive mobile market.
Not everyone is convinced that Dish can make this happen. There are still several states that have previously sued to block the deal and have not yet agreed with the DoJ’s position. And as former Federal Communications Commission official, Gigi Sohn, said, "The state AGs who sued to block the merger shouldn’t be fooled by this weak attempt to maintain competition in the mobile wireless market.... A new mobile wireless entrant that starts with zero postpaid subscribers and that must rely on its much bigger rival, the new T-Mobile, just to operate is not a competitor. It's a mobile Frankenstein."
While that may be a little harsh, it will be a tough challenge for Dish to do alone. But Dish does need to evolve: the core business of satellite-based TV service is clearly under pressure, and Dish is looking at a streaming based future, particularly through Sling TV. For that to stand out, from the plethora of alternatives, Dish will clearly benefit from owning a consumer-focused mobile service. But I’ll leave you with one question: is it truly fair to call the new “Dish Mobile” the “fourth carrier” when it owns less than 10 million subscribers? That’s roughly 10 percent of what the “Big Three” each have.