- On Friday, the Justice Department cleared a landmark deal to combine T-Mobile and Sprint while Dish will become a fourth US wireless company.
- According to a new profile published in the Wall Street Journal of Dish’s CEO Charlie Ergen, serious talks between the three companies started in May and continued through June. The Department of Justice then spent three weeks asking for better terms.
- Dish will face challenges in building out a wireless business that can rival AT&T, Verizon and a combined T-Mobile and Sprint company.
- Ergen has clashed with networks over programming fees for Dish’s pay-TV service, is a notoriously frugal executive, and has compared how he makes business decisions to “Indiana Jones” movies.
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On Friday, the Justice Department cleared T-Mobile’s $US26.5 billion acquisition of Sprint, eliminating a big hurdle in the telecom’s proposed takeover to combine both companies.
The long-desired deal has prompted concerns that T-Mobile and Sprint will operate as a monopoly in the telecom space with only AT&T and Verizon as competitors. As a result, AT&T and Sprint have agreed to sell off portions of their business to pay-TV operator Dish to create a fourth major wireless player.
Under the conditions agreed on by the companies, Dish is required to build out a 5G network that covers 20% of the US by 2022 and will span to 70% by 2023. If Dish is unable to do so, the company will owe the U.S. Treasury $US2.2 billion. Dish will receive nine million of Sprint’s prepaid customers, licensing rights in rural areas, and access to T-Mobile’s network for seven years while it builds its own national network.
At the helm of Dish is CEO Charlie Ergen, who plays a critical role in making T-Mobile’s acquisition successful. Ergen has long been a critic of T-Mobile’s mega-deal but things took a turn when T-Mobile’s CEO John Legere called Ergen in late May in need of help, according to a new Wall Street Journal profile.
According to an interview with Ergen, Legere told him in May that the “Justice has said that we need a fourth carrier. We should talk if you are interested.”
Ergen negotiated with Legere and Sprint chairman Marcelo Claure throughout June. The Justice Department then asked for better terms for three weeks, the Journal reported.
Ergen is a former professional poker player who compares how he makes business decisions to “Indiana Jones” movies because “the hero narrowly dodges a never ending string of lethal threats,” reports the Journal.
With its pay-TV service, Dish has fought with networks like HBO and Disney over programming fees, causing blackouts for subscribers including the last season of “Game of Thrones.”
The profile also suggests that Ergen isn’t as frugal today as he famously was in the past. For example, he’s stopped requiring executives to share hotel rooms and now flies in a private jet, sources told the Journal.
Dish has a tough road ahead to compete with Verizon and AT&T
While Dish will acquire nine million Sprint customers to kickstart its wireless business, it faces challenges in building a wireless business that can rival AT&T, Verizon, and the combined T-Mobile and Sprint. Verizon and AT&T have 200 million subscribers, and the combined T-Mobile and Sprint company would have more than 80 million subscribers.
The companies have spent decades acquiring customers and building wireless connections to cover the US, and are racing to roll out 5G technology.
Specifically, Ergen said that Dish will focus on offering on-demand pricing and target businesses like automakers with 5G.
“With four, there’s always somebody that will be a rabble rouser,” Ergen told the Journal in the interview. “Somebody will say I don’t have enough market share. I’ve only got nine million subs and want 10 million. That person is going to be more aggressive. The guy who’s got 100 million, he’s just going to hope he holds onto them.”
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