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In order to win Justice Department approval for their deal, Sprint and T-Mobile appear poised to sell spectrum and prepaid customers to Dish Network for a reported $5 billion.
Why it matters: Regulators in the past have blocked any deal that would have eliminated one of the current Big 4 mobile networks. An asset sale allows them to claim, at least on paper, that there will still be four players. But analysts have their doubts just how big a player Dish would be.
Dish has been a potential wireless entrant for some time, having scooped up a significant amount of spectrum in recent years — spectrum it is under pressure to use soon or risk losing. Back in 2013 Dish lost out in a bidding war with SoftBank for control of Sprint.
So it's not surprising that Sprint and T-Mobile are looking in Dish's direction, nor that regulators see it as a potential way to avoid admitting the deal will reduce competition.
Be smart: Even if the DoJ signs off on the deal, several states have already sued to block the merger, so they would have to be persuaded as well.
And many experts doubt that Dish alone will be a significant rival.
- It's not so much a question of "Can Dish compete?" but rather whether it has the stomach to do so, New Street Research argued in a report Wednesday.
- If they build a low-cost network, the firm argues, such a network can probably get customers. But whether Dish has the interest or skill to really build a network is far from certain.
Even if Dish does build a network, wireless consultant Chetan Sharma predicted that it won't want to be in the business for the long haul. Instead Dish would look to run it for a few years and ideally sell it back to one of the big three operators.
- Even with the added spectrum, Sharma said Dish won't have much market share — around 2% of industry revenue vs. Sprint's current 12%. Also, he said Dish lacks the capital to invest long term.