Dish Network wants to buy 800 MHz licenses from T-Mobile, but it doesn’t have $3.5 billion on hand to finance the purchase, so it’s asking the U.S. government to give it 10 more months to come up with the capital.
In a filing with the U.S. District Court for the District of Columbia, Dish argues that turmoil in global capital markets in the past few years have made Dish’s ability to buy the licenses more onerous than anticipated.
Dish figures that 10 months is enough time to raise additional capital and obtain financing, in part because its just-announced merger with EchoStar will put it on more solid financial footing.
Low-band coverage
The 800 MHz spectrum transaction is part of a deal hammered out with the government to allow T-Mobile to merge with Sprint. Dish was a party to the transaction because it was set up to be a No. 4 facilities-based carrier to replace Sprint and conditions were set forth to make that happen.
One of those was the ability for Dish to acquire the 800 MHz licenses, which would be advantageous to Dish because of its great low-band spectrum coverage propagation characteristics. Dish in June announced that it covers more than 70% of the U.S. population with its 5G network, but it’s still got a long ways to go before its anywhere near the Big 3 wireless carriers in terms of coverage.
Recognizing the importance of the spectrum for its greenfield 5G network deployment, Dish already spent more than $1 billion to support 800 MHz on its network. Specifically, Dish said radios compatible with 800 MHz are now on more than 16,000 towers where it has deployed 5G, meaning 800 MHz can be made available to customers immediately upon acquisition of the licenses.
Dish and T-Mobile this week filed for regulatory approval from the FCC for the transfer of the 800 MHz licenses from T-Mobile to Dish. However, the timeline for FCC approval is uncertain, Dish told the court.
Among the events that Dish cites as extenuating circumstances are Covid, the war in Ukraine, the failures of large regional banks and “other macroeconomic dislocations” that have led to substantial inflation that central banks in the U.S. and elsewhere have addressed by raising interest rates dramatically over the last 18 months.
“The dramatic increase in interest rates has made it significantly more expensive for Dish to finance a purchase of the 800 MHz Spectrum Licenses, rendering its ability to responsibly do so within the timeline provided by the Final Judgment substantially more difficult than Dish – or other parties to the Final Judgment – ever could have anticipated,” Dish told the court.
In a note for investors Thursday, analysts at New Street Research said they assume T-Mobile opposes the extension and they don’t yet have a view on whether the Department of Justice (DoJ) is likely to grant it, but they expect to have more insights soon.
Update: NSR policy analyst Blair Levin provided NSR’s preliminary view in a note for investors Friday morning, saying it’s a close call but the odds favor DoJ approval of Dish’s request for more time. Having only seen Dish’s filing and not T-Mobile’s response, it’s tricky to make a prediction, but from a competitive perspective, there appears to be no harm in granting the request, he said.
“Denying the request will result in Dish never being able to obtain an asset the DoJ viewed as essential for it to successfully enter the wireless market,” he wrote. “Further, forcing TMUS to auction the spectrum now would likely result in AT&T or Verizon controlling the spectrum, thereby shutting the door on a future new entrant, something the DoJ is unlikely to want.”
The DoJ as an institution made a big bet on Dish succeeding and while the DoJ generally believes it’s important to strictly enforce conditions, it’s NSR’s belief that the DoJ is likely to prioritize short-term pragmatism and the potential impact on competition over the speculative impact on how other parties subject to merger conditions seek to renegotiate those conditions in the future, he added.