Report: Dish, T-Mobile Talks Hit Snag

Bloomberg Says Parties Can’t Agree On Structure, Value
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Merger talks between Dish Network and wireless carrier T-Mobile have apparently hit a snag around structure and valuation, according to a report by Bloomberg, a move that is further complicated by upcoming wireless spectrum auctions.

According to Bloomberg, Dish and T-Mobile parent Deutsche Telekom would have to work out those differences in the next two-to-three months, in order to be ready for the upcoming incentive auction for spectrum slated for the first quarter of 2016.  According to Federal Communications Commission anti-collusion regulations, neither party would be able to speak to each other while the auction was in process. It is that deadline that has caused Bloomberg to speculate, according to its unnamed sources, that a deal is unlikely.

Dish declined comment.

The impasse appears to have halted what was a whirlwind few months for the companies. In early JuneThe Wall Street Journal reported that the two were in preliminary talks and had agreed to some broad structural issues – mainly that Dish chairman Charlie Ergen and T-Mobile CEO John Legere would retain those roles in the combined company. But the two were said at the time to be far apart on price. Later that month reports surfaced that Dish was attempting to line up between $10 billion and $15 billion for a T-Mobile bid.

T-Mobile is the fourth largest wireless carrier in the country and though Deutsche Telekom has expressed an interest to sell, it isn’t in a hurry to do so. T-Mobile has performed well recently and its list of potential suitors has grown recently to include Comcast, Altice and Sprint. Sprint abandoned takeover talks with T-Mobile in 2014 after determining that a bid would not receive regulatory approval. But with a presidential election coming in 2016, there is some hope that a new Administration could be more open to a deal.

Dish also is under some pressure resulting from its last spectrum auction. According to the Journal, FCC chairman Tom Wheeler has circulated a draft order that would reject about $3 billion in discounts Dish received through so-called designated entities.

In a note to clients, Elevation LLC analyst Stephen Sweeney said Dish would likely be able to pay the additional $3 billion, and that it could be a benefit in that it would remove some restrictions and limitations around third-party leasing attached to the licenses.

“So while Dish or its JV partners may pay a higher price, they would also theoretically be getting a higher quality license that is free of restrictions,” Sweeney wrote.

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