DISH’s Deal with Boost Mobile is in Limbo

As part of the Sprint and T-Mobile merger, DISH Network was supposed to buy Boost Mobile but it appears that the $1.4 billion deal is at a standstill. So the question is, what’s going on? 

Joe Galone and Walter Piecyk, LightShed Partners analysts wrote today in a blog post, “We are unaware of why DISH has not closed the Boost deal,” they continued, “It should have been done by June 1st. Something is up.” 

The companies must close their deal by the July 1st deadline given to them by the US Department of Justice (DoJ). “If T-Mobile is not delivering certain technical capabilities under the transition services agreement, the DoJ has the ability to compel them to do so,” the analysts wrote. “If Charlie Ergen is stalling or negotiating in bad faith, it also has the ability to compel Dish to close.”

T-Mobile has said that they will close the deal this quarter. However, DISH has declined to make any comments regarding the Boost deal. A company spokesperson noted that they are still within that July 1st deadline, which will be 90 days since the government’s consent decree which was filed on April 1st. 

DISH co-founder and chairman, Charlie Ergen, said on DISH’s Q1 conference call on May 7th that certain things needed to come to fruition before the merger could go through, one mention being cross provisioning. This is important because when DISH takes over the Boost service, it would need to provision all of the new and existing customers on the T-Mobile network, and not the Sprint network that Boost is currently using. 

“We don’t necessarily want to go back and we don’t want to necessarily put people on the Sprint network, and then have to go back and switch them later, and the cost of switching later to T-Mobile network…” Ergen said. Every time you switch a customer, “you have excess churn… So that condition hasn’t been met yet,” and June 1 would have been the earliest it could close but that didn’t happen. “It could be July 1st,” if that condition wasn’t yet met.

LightShed analysts also pointed out that DISH and T-Mobile haven’t agreed on terms on a 600 MHz spectrum lease- something that is required by the DoJ judgment on the merger between Sprint and T-Mobile. Analysts believe that the terms will be announced when they close the deal involving Boost. 

The analysts also suggested that T-Mobile should ask for a 3-year lease on DISH’s 600 MHz spectrum for $350 million per year, citing a recently signed 600 MHz spectrum lease deal with Columbia Capital. The DoJ could use that deal to help put together the spectrum lease deal with DISH. 

“It’s not unreasonable to speculate that the motivation for T-Mobile’s deal with Columbia, which oddly lacked a right to buy, was to influence the DoJ process,” Galone and Piecyk wrote. “T-Mobile should also ask the DoJ to compel Dish to immediately close on the $1.4 billion acquisition of Boost Mobile.”

Since Ergen started purchasing spectrum, according to analysts at New Street Research no company has fielded more questions from investors than DISH Network. 

One of the more frequently asked questions: How will disputes between T-Mobile and DISH be resolved? Blair Levin, New Street policy analyst wrote, “It is clear from recent filings that the momentary kumbaya relationship between DISH and TMUS during the final phase of the merger review has left and there has been a return to the more combative relationship that marked the first phase of the merger review.”

Investors were also curious as to how transactions via MVNOs will be reviewed. The DoJ appointed Ted Ullyot, former general counsel of social media titan, Facebook, will be the monitoring trustee for the deal. Therefore, Ullyot will review all disputes that arise and provide recommendations of how they will be handled. Levin said, “While the DoJ has the final word, as a practical matter, Mr. Ullyot’s recommendations are likely to become the DoJ decision.”

The MVNO deal DISH made with T-Mobile is for seven years and will provide DISH with some wireless revenue as they race to build out their 5G network. DISH has been working tirelessly to add the best-of-the-best in industry talent to the management and exec team, including former T-Mobile executive, Dave Mayo, who will be EVP of Network Development. 

Wells Fargo Securities analysts said that it appears DISH is going to deliver on their word and that DISH has already signed hundreds of leases. 

Source: Fierce Wireless