July 26, 2019
The Department of Justice signed off on the proposed US$26.5 billion merger between Sprint and T-Mobile under an agreement that calls for Dish Network to purchase Sprint's prepaid customers and 800MHz spectrum for $5 billion. Dish, for its part, promised to build a 5G network that will cover 70% of the US population by June 2023 with speeds of at least 35Mbit/s.
The transaction is designed to position Dish as the nation's fourth wireless provider, replacing Sprint.
However, the new transaction still faces opposition from more than a dozen states. Attorneys general from New York, California, Colorado and elsewhere today reaffirmed their opposition to the merger of Sprint and T-Mobile, even with the presence of Dish. Their lawsuit, initially filed in June, is headed to trial in October.
Dish will acquire Sprint's entire prepaid business covering 9.3 million customers and the operator's Sprint, Boost and Virgin prepaid brands. Dish will also gain 480 Sprint employees and the option to purchase at least 400 retail locations. Dish is also on the hook to provide postpaid services within one year of the deal closing.
Both Dish and T-Mobile said they will support eSIM technology as part of their deal. Such technology makes it much easier for customers to switch providers because they won't have to change the SIM card in their phone.
Dish will gain access to the combined Sprint and T-Mobile network as an MVNO for seven years "as well as through an Infrastructure MNO arrangement enabling roaming in certain areas until Dish's 5G network is built out," Dish said. The agreement sets the stage for Dish to manage Sprint's prepaid customers as an MVNO of T-Mobile while building its 5G network. As Dish constructs its network, its customers will be able to use its 5G network while also roaming onto T-Mobile's 5G network in areas where Dish doesn't offer service.
T-Mobile will give Dish "standard transition services arrangements" for three years following the close of the transaction.
Dish will buy 13.5MHz of Sprint's nationwide capacity in the 800MHz band for $3.59 billion.
Dish and T-Mobile said they "committed to negotiate the leasing of Dish's 600MHz spectrum to T-Mobile for a transitional period of time."
Dish will be able to buy at least 20,000 of the cell sites that Sprint and T-Mobile plan to decommission as part of their merger. Last year T-Mobile and Sprint said operate a total of around 110,000 towers. The companies said they would shutter 35,000 towers as part of their merger, but to construct another 10,000 in different locations.
Dish said it will build a 5G network across its 600MHz, AWS-4, 700MHz E Block and AWS H Block spectrum licenses, as well as Sprint's 800MHz spectrum. The company agreed to meet specific buildout targets including covering at least 20% of the US population by 2022 and at least 70% of the US population by June 14, 2023, via at least 15,000 5G sites. If it misses that buildout it could pay the US government up to $2.2 billion.
Dish also agreed to prohibitions designed to prevent the company from selling its spectrum or itself to another company.
The transaction -- if it is ultimately approved by regulators and shareholders -- would bring to a close two important storylines in the wireless industry. First, and perhaps most importantly, it combines the nation's third (T-Mobile) and fourth (Sprint) largest wireless network operators into a single provider, although that company still wouldn't be as big as either AT&T or Verizon in terms of customers. However, the combined Sprint and T-Mobile will own dramatically more spectrum for 5G than either AT&T or Verizon, potentially positioning the combined company to build out a massive, super-fast 5G network.
Indeed, if their merger is ultimately approved, the combined Sprint and T-Mobile has promised to pour billions of dollars into the construction of a 5G network that would stretch across T-Mobile's 600MHz spectrum and Sprint's 2.5GHz spectrum. The combination of those two spectrum bands in 5G promises to offer broad coverage (via the propagation characteristics of 600MHz) as well as enormous capacity and significant speed (via the propagation characteristics of 2.5GHz).
Already T-Mobile has said that the merged company will offer 5G-powered, in-home Internet services to millions of Americans in what would be a direct attack on existing wired Internet providers like Comcast and AT&T.
But the transaction also appears to bring to a close another major storyline in the wireless industry: that of Dish Network's transition from a flagging satellite TV provider to an up-and-coming 5G network operator. Dish has been accumulating spectrum licenses for more than a decade now, and today sits atop spectrum holdings that rival those of Verizon. Many expected the company to eventually cash in on its spectrum adventures via a sale of its spectrum holdings to a company like Comcast or Verizon, but today's transaction positions Dish to instead put its spectrum holdings into action via the construction of a nationwide 5G network.
Whether Dish will be able to successfully challenge the likes of AT&T or Verizon in 5G remains to be seen, but Dish chief Charlie Ergen has made it clear that he's not going to chase 5G smartphone users but instead will pursue the Internet of things, including providing connections to all kinds of gadgets from robots to drones to automobiles.
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