To sell regulators their $ 26 billion mega-merger, executives at T-Mobile and Sprint have told anyone who listens that the deal will deliver near-miraculous benefits. But economists have warned that promises to merge telecommunications in the United States have historically made no sense and that reducing the total number of competitors would – sooner or later – lead to higher prices and job cuts.
Instead of heeding their warnings and blocking the deal, US antitrust authorities concocted an elaborate workaround: They would erect Dish Network as the country’s new fourth major wireless operator. As part of the plan, Dish received spectrum from T-Mobile, prepaid brand Boost Mobile, and assurances that T-Mobile would help Dish run a mobile virtual network operator (MVNO) while building its own nationwide network. .
But feuds between the companies culminated this week when Dish announced it would replace T-Mobile with AT&T as its primary partner, saying T-Mobile and Dish were simply unable to get along, and the government failed. never been so interested in forcing them.
“If T-Mobile is able to evade this regulatory obligation with impunity, what will prevent future consent orders from being ignored? Hal Singer, an economist who testified against the approval of the merger said The edge.
Earlier this year, Dish called T-Mobile “cranky” for shutting down its CDMA network earlier than expected. In complaints to state and federal regulators, Dish accused T-Mobile of reneging on merger promises and said the shutdown risked leaving many of Boost’s 9 million wireless customers without service in 2022. T -Mobile denied the fault and effectively accused Dish of not understanding his own deal.
So far, the Biden administration, mainly focused on big tech political conversations, hasn’t taken much action in the telecommunications space. The administration has yet to fully staff the FCC and just appointed a DOJ antitrust law enforcement official this week. Dish’s deployment goals are a long way off, and any meaningful government action, if any, will likely stick around for years to come.
The deal gives Dish until 2025 to roll out its wireless network to 70% of the population. Considering that 70 percent of the United States lives on about 3 percent of the nation’s landmass, this shouldn’t have been a particular challenge. (Dish has given no public indication that it is still nearing that goal.) But it achieves 95 percent coverage where Dish needs help, given that the remaining party lives over ten times the land mass of the original 70 percent.
That’s where Dish’s $ 5 billion deal with AT&T comes in. Under the proposal, AT&T will grant Dish MVNO customers access to AT & T’s 4G and 5G networks in rural and harder-to-reach markets, while Dish focuses on building its own 5G network in larger cities. Dish will still have access to T-Mobile’s network until 2027, but AT&T will now be Dish’s primary partner.
In a research note to investors, Wall Street analyst Craig Moffett says that while Dish’s relationship with T-Mobile has deteriorated, the deal with AT&T likely increased Dish’s chances of survival as wireless operator – at the moment.
“Under the T-Mobile deal, Dish had until 2025 to satisfy the FCC, but only two years later to meet much more demanding customer demands,” Moffett said. “It has always been the real challenge.
Since AT&T has never offered CDMA access, the deal won’t resolve Dish’s complaints about T-Mobile’s decision to shut down its CDMA network, which could hurt Boost Mobile subscribers. AT&T, meanwhile, is grabbing significant wholesale revenue with the dangerous bet that Dish will never be successful enough to erode AT & T’s market share.
But with wireless and TV subscribers bleeding at an alarming rate, time is running out for Dish’s overall survivability. Over the next six years, Dish must remain financially viable, build a massive and popular next-generation wireless network, satisfy state and federal regulators, and somehow steal significant market share from an industry. US telecommunications historically opposed to being significantly disrupted by competition.
That’s a big claim for a company long criticized – including by T-Mobile in 2018 – for gobbling up precious spectrum treasure and then breaking promises to use that spectrum. As the government deal bans Dish from selling its spectrum for six years, analysts have long wondered if Dish will just chain regulators, sell its spectrum, then use the huge profits to mock all regulatory, legal obligations. and remaining contractual.
Moffett tells The edge that Dish has already spent over $ 10 billion on long-term cell tower leases and stands to lose its spectrum in addition to financial penalties for missed deployment goals. Singer, however, is unimpressed with the integrity of the merger deal with the government and still believes an early exit from Dish remains possible.
“Executive Order has always given Dish an easy way out,” Singer says. “The real target of the settlement was T-Mobile. And now T-Mobile is starting to sneak in.
The saga could also end with AT&T buying Dish Network, with AT&T grabbing the vast spectrum holdings of Dish, the US wireless industry consolidating even more, and everyone involved claiming that none of the above. that never happened.
Meanwhile, other merger promises are not being kept. T-Mobile’s promise that the deal would create new jobs – still visible on the company’s website – ended up not being worth much. Although it claims the deal will be “positive jobs from day one and every day thereafter,” the company has cut 5,000 jobs so far, as critics like Singer had predicted.
Historically, antitrust authorities are expected to examine the available evidence of a proposed union and act upon it. In the case of Sprint and T-Mobile, the Trump FCC approved the deal even before seeing the impact assessment, and Trump DOJ’s senior antitrust enforcement official, Makan Delrahim, has personally worked with all three companies to secure approval of the deal.
Instead of just blocking the merger and finding a way to support Sprint, the resulting solution has always required a great deal of optimism in both the integrity of corporate merger promises and the competence of US regulators. Now consumers expect a network that may never happen, based on relationships that were sour from the start.
“Just like Delrahim scripted it,” Singer jokes.