Dish's Big Bet on Airwaves Dealt Blow by T-Mobile's Sprint Deal

(Bloomberg) -- Billionaire Charlie Ergen, accustomed to doing things his way, is looking more alone in an era of phone and media consolidation.

Dish Network Corp.'s co-founder and chairman has grand plans to deliver video over a vast new wireless network. He's acquired airwaves worth as much as $40 billion and has built Sling TV into the most popular live online TV service in the U.S.

But finding a wireless partner has always been a crucial part of those plans. Turning vacant airwaves into a working network is costly and, as Ergen has made clear, not something Dish wants to do by itself. With Sprint Corp. and T-Mobile US Inc. merging, the options may narrow to the biggest wireless providers -- Verizon Communications Inc. and AT&T Inc. -- or a big tech company eager to get into mobile and entertainment.

“These are interesting times for Charlie,” said Amy Yong, an analyst with Macquarie Capital USA Inc. “The options seem to be running out for him.”

Adding to the pressure: Dish's pay-TV service, the fourth-largest in the U.S., is losing customers. It's managed to slow the decline with the $20-a-month Sling offering, which has attracted more than 2 million customers. But those subscribers pay less than a fourth of what conventional satellite TV costs.

Dish's shares, meanwhile, have plunged almost 60 percent from their 2014 high. Investors have become increasingly alarmed about customer losses and are waiting for more clarity on how the company will transform its spectrum holdings from an asset into a business.

Dish declined to comment on the deal between T-Mobile and Sprint. But investors may glean some insights about its plans on Tuesday, when the Englewood, Colorado-based company reports its quarterly results.

The T-Mobile deal is “definitely not good news for Dish,” said Tim Farrar, a wireless analyst with TMF Associates Inc. The merger removes two potential partners that could have established Dish as a new wireless competitor or served a role as hosts for Dish's airwaves, Farrar said.

Dish had been interested in deals with both carriers in recent years. In 2013, Dish lost its $25.5 billion bid for Sprint to SoftBank Group Corp., its current owner. After that move failed, Ergen said he considered making an offer for Deutsche Telekom AG's stake in T-Mobile.

Other options aren't necessarily as clear.

AT&T has plotted its future in media and is close to learning the fate of its $85 billion takeover of Time Warner Inc. The transaction was blocked by a U.S. antitrust lawsuit, and the judge is expected to announce whether the deal can go through on June 12.

Verizon could use Dish's airwaves to help expand capacity and build a so-called 5G network, but the company has said previously that it's not interested in the satellite-TV business. Verizon declined to comment on the matter.

Changing Times

The question now is whether new deals might change old views.

“Verizon is definitely now at the top of the list for Dish,” Macquarie's Yong said. Facing the prospect of a more formidable T-Mobile, “Verizon might feel it needs more spectrum. I think it obviously comes down to a matter of price.”

At a time when people are watching more mobile video and internet-connected self-driving cars are just around the corner, Ergen's pile of unused airwave licenses represent valuable new capacity in a data-hungry world.

But the clock is ticking for Dish.

The company could lose airwave licenses if it doesn't use some of the spectrum by March 2020. Bowing to those use-it-or-lose-it rules, Dish has started building an “internet of things,” a narrow-band network to connect machines, devices and sensors.

Dish could fight the Federal Communications Commission over implementation of the must-use rules. But if it got to that point, Farrar said, “Ergen would be under even greater pressure to accept a lowball offer for Dish's spectrum.”

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Nick Turner, Lisa Wolfson

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