There’s another major media deal in the works. This time the merger is between Dish Network and T-Mobile. The move comes as companies are vying for customers and capturing them no matter what device they’re using.
The New York Times story by Emily Steel and David Gelles said that many companies are fighting to stay relevant as customers’ tastes change:
Merger mania has taken over the media business.
Facing an unprecedented period of disruption, media companies are racing to guarantee their positions in a future controlled by digital and mobile by betting that scale matters. The latest development came Thursday, when it emerged that the satellite TV company Dish Network was in talks to acquire the wireless provider T-Mobile US, according to people briefed on the discussions.
A merger would be the latest in a flurry of megadeals to reshape the country’s gateways to video, broadband and mobile. T-Mobile US has a market value of $31 billion, and Dish Network is worth nearly $35 billion.
“Another week, another deal, or maybe not. Who knows?” said Amy Yong, a Macquarie Group media analyst. “It’s kind of crazy. When it rains, it just pours.”
Should Dish and T-Mobile strike a deal, 2015 would set a record as the strongest period in deal making for the global media and entertainment sector since 2000, according to Thomson Reuters. So far, activity this year has reached $155.3 billion, with merger and acquisitions in the cable industry alone the biggest since records began in 1980.
Antoine Gara wrote for Forbes that the deal was appealing since it wasn’t likely to run afoul of antitrust laws:
A merger would help T-Mobile round out it spectral assets with the combined company having positions of 16MHz of 700MHz spectrum — 10MHz from T-Mobile and 6MHz from DISH — in addition to 40MHZ of PCS spectrum and 109MHz of AWS spectrum, according to an analysis from Evercore Partners. It would also give the combined company the customer base to begin looking into ideas like mobile broadband and quadruple play packages that have been talked about in the industry for years. Although Dish may ask for a price north of $60 billion, wireless network synergies and potential operational efficiencies mean a deal likely would come with forecasts of earnings and cash flow growth.
Other than the financial aspects of the deal, what’s most appealing is its limited antitrust risk, especially when contrasted with recent M&A in the wireless and communications industry.
AT&T set off a wave of wireless consolidation after it failed to win antitrust approvals for a $39 billion takeover of T-Mobile. Once that wave was completed, Sprint and T-Mobile then began floating the notion of a merger, only to receive clear push back from the FCC and Department of Justice. Most recently, a nixed merger of Comcast and Time Warner Cable TWC -0.01%underscores regulators’ seriousness in overseeing industry consolidation.
Greg Roumeliotis, Alina Selyukh and Malathi Nayak wrote for Reuters that this isn’t the first time the two companies have talked deal:
Dish and T-Mobile have in the past entertained a potential deal, which would be the latest in a wave of tie-ups in the telecom and pay-TV industries as companies look to offer more services for customers.
Earlier this year, Ergen said he was “impressed” by the wireless carrier and Legere said it made sense for his company to team up with Dish. The satellite provider could offer up to $40 per share in cash and stock for T-Mobile, according to an early estimate by Macquarie analyst Amy Yong.
The merger talks are at an early stage and important aspects such as a price and structure have yet to be determined, the source said. Ergen has in the past walked away from other deals at the last minute.
Dish in recent years has amassed spectrum, radio frequencies that carry the growing amounts of data flowing through devices, without building out infrastructure to offer its own wireless service. The company recently launched an online streaming video service, Sling TV, to offset the loss of pay-TV subscribers.
CNET’s Roger Cheng had these thoughts on why the two companies would want to merge in the first place:
T-Mobile and Dish are both smaller companies facing much larger adversaries. While T-Mobile has shown impressive growth over the last year and a half, the company is still well behind competitors AT&T and Verizon. Verizon, for instance, has roughly twice the number of customers as T-Mobile.
Likewise, Dish has always played second fiddle to DirecTV, which is about to get even bigger once it combines with AT&T.
A combination between T-Mobile and Dish gives both companies options. The merged company could offer both wireless and television services, the same rationale used to justify the AT&T-DirecTV deal. Dish is also sitting on a valuable stockpile of spectrum, or wireless licenses that could greatly expand T-Mobile’s ability to offer faster and more reliable service.
Ergen, meanwhile, has been public about his desire to get into the wireless business. Dish has actively participated in spectrum auctions, and two years ago, made unsolicited bids for both Sprint and wireless provider Clearwire, which was eventually folded into Sprint.
The possibility of this deal seems to have excited analysts and other industry watchers. Because it isn’t likely to run afoul of regulators, that makes it even more appealing. Both companies need to do something to capture more market share. The trick will be merging two different cultures and businesses in order to create something that adds value.
