Dish shares were up by as much as 5% on Monday after reports that the satellite giant was in talks with T-Mobile USA to extract more favorable terms in its pending purchase of the cell phone company’s Boost Mobile prepaid wireless business.
Dish stock was priced as high as $34.55 each on Monday, up 5% or $1.66 each. The stock closed at $34.04 (up $1.34, or 4.1%) on June 15.
Dish agreed to purchase T-Mobile’s Boost Mobile business earlier this year, part of the concessions the wireless carrier made in obtaining federal regulatory approval of its $26 billion purchase of Sprint. Dish had agreed to purchase Boost for $1.4 billion, and also pledged to purchase 800-Megahertz wireless spectrum from T-Mobile for $3.6 billion over three years. Dish also agreed to a mobile virtual network operator (MVNO) agreement with T-Mobile that would give it access to the larger company’s mobile network over seven years.
The Boost deal is scheduled to close on July 1, but several reports citing unnamed sources familiar with the transaction have claimed that Dish is attempting to get the prepaid service at a lower price, given the COVID-19 pandemic. Fox Business reporter Charlie Gasparino tweeted about potential problems with the deal last week, saying T-Mobile was looking at its options, including finding another buyer for the prepaid service.
While some analysts have said Dish has leverage in the negotiations because T-Mobile needs the deal to close its larger Sprint transaction, others have said the onus is on Dish and its chairman Charlie Ergen.
Dish Network declined comment.
In a blog post Monday, MoffettNathanson principal and senior analyst Craig Moffett noted that Dish needed the Boost deal to help it realize its own wireless service. Dish has been buying up wireless spectrum for years, and faced a 2020 deadline to have a wireless network up and running and available to 70% of the country or have its licenses revoked by the federal government. The Boost deal gave Dish a reprieve -- it now has to build that network by June 2023 -- and Moffett sees little wiggle room for Dish.
“The value of the prepaid business might be debatable. The value of the MVNO agreement and the license extensions is not,” Moffett wrote. “It may be Dish Network’s style to always argue over every dollar. But that impulse seems largely self-defeating in this case.”
LightShed Partners principal and telecom analyst Walt Piecyk wrote in a blog posting that he expects the Boost deal to close on July 1.
“Charlie Ergen has not given any indication to investors, equipment vendors, software vendors, tower companies or just about anyone, for that matter, that he would like to walk away from the MVNO agreement or the Boost deal,” Piecyk wrote. “In addition, and as we wrote last week, we believe the Covid Pandemic or any other ‘force majeure’ is not sufficient to change or break the Boost deal based on our reading of the terms of the agreement. We aren’t lawyers, but it seems pretty straight forward if you actually read it.”