T-Mobile US (NYSE:TMUS) is unlikely to strike a deal in the near term with any other cable or telecommunications providers aside from Dish Network (NASDAQ: DISH), according to a report from Wall Street firm Macquarie Capital.
In a research note assessing the impact of Charter Communications' (NASDAQ: CHTR) proposed $56.7 billion purchase of Time Warner Cable (NYSE: TWC), Macquarie analysts said that other potential suitors or partners for T-Mobile are unlikely to make a move. Those include French telecom group Altice, which last week unveiled plans to buy a $9.1 billion for a controlling interest in U.S. cable operator Suddenlink Communications. Comcast (NASDAQ: CMCSA), which was thwarted by regulatory opposition in its own bid for Time Warner Cable, is also seen as a potential--if unlikely--suitor for T-Mobile.
"For Comcast, an outright purchase of a wireless network is possible, but likely premature at this point; we believe the company is likely to focus on returning capital to shareholders in the near-term," the analysts wrote.The most likely scenario, the analysts wrote, is that T-Mobile will remain independent for the next year, or that Dish will strike a deal for T-Mobile at around $40 per share if it can persuade T-Mobile parent Deutsche Telekom on the financing of the deal.
Deutsche Telekom CEO Timotheus Hoettges said last week the company will consider any partnership for T-Mobile that can improve profitability at the carrier. Hoettges said at the company's annual shareholders meeting that T-Mobile, which Deutsche Telekom still has a 66 percent stake in, is in much better shape today than it was two years ago when it started its "uncarrier" initiative.
"But it is our duty to go on improving the return on T-Mobile US," he said, according to Reuters. "If we find a partner who will help us to do so, we will obviously consider it."
Lately T-Mobile executives have been more open about the possibility of working with another company, and not even necessarily another wireless carrier. Dish CEO Charlie Ergen has also been complimentary of T-Mobile and its management team.
Dish must find a way to deploy it's spectrum. T-Mobile or Sprint are the options. Got this from TMF blog.
While the eventual FCC decision on DISH’s $3.3B discount remains uncertain (and according to FCC Chairman Wheeler would not in any case involve denial of the licenses or reauctioning of the spectrum), it is far from a slam dunk (as some argued originally) that DISH will keep the discount. Nevertheless, it seems to me that Verizon and AT&T could even be better off if DISH kept the DE discount, and that might provide one reason why they held back from challenging DISH’s licenses directly.
Of course DISH would lose $3.3B if the DE discount was rejected, but in that case, DISH would acquire NorthStar and SNR under the terms of its agreements with the DEs, and would be free to consolidate and restructure its AWS-3 and AWS-4 spectrum holdings. After that, in my view, the most likely end game would be to spin-off all of DISH’s spectrum (AWS-3, AWS-4, 700MHz E-block, PCS H-block) into a holding company, which could lease individual licenses to any wireless operator, and raise perhaps $20B-$30B of debt at the spinco level, flowing that cash back up to DISH (and perhaps allowing Ergen to take some chips off the table).
Any repricing of the AWS-3 spectrum would presumably increase Ergen’s asking price for his leases, meaning that Verizon and AT&T might ultimately be the ones to suffer from the removal of the discount. In fact Verizon might even decide it had to pay up and pre-empt the spinoff because of the prospect that this arrangement would make more spectrum available in key markets for both T-Mobile and Sprint.
However, in order to execute these spinoff plans and enter into meaningful leases of AWS-4 spectrum, it is critical that DISH secures interoperability for its AWS-4 downlinks (2180-2200MHz) with the AWS-3 blocks. T-Mobile and Sprint know all too well that building out networks in bands without an ecosystem (such as T-Mobile’s deployment of WCDMA/HSPA in the AWS-1 band, which was ultimately abandoned, and Sprint’s PCS G-block LTE network) makes it much more difficult and expensive to secure handsets (hence there was no WCDMA iPhone operating in AWS-1 and Sprint had to guarantee billions of dollars of purchases to secure a G-block iPhone). As a result, they are unlikely to want to get into bed with DISH and make use of AWS-4 unless and until there is some guarantee of a handset ecosystem.
While DISH can pursue a band class designation for AWS-4 supplementary downlinks through 3GPP, we only need to look at the story of Band Classes 12 and 17 (in the lower 700MHz band) to see that a band class designation on its own, without any regulatory mandate for interoperability, is insufficient to ensure a handset ecosystem is created. And at the end of the day, the FCC was forced to intervene and broker a deal to ensure interoperability in the lower 700MHz band, before T-Mobile moved to buy 700MHz A block licenses for its low band coverage buildout.
Its therefore hardly surprising that AWS-3/4 interoperability was a key request of DISH in March 2014 before the auction, and fiercely opposed by Verizon and AT&T. At the time, the FCC decided not to impose a mandate, but strongly suggested that cooperative efforts should be made to ensure interoperability with AWS-4:
Given the likelihood that AT&T and Verizon will engage in delaying tactics (not least due to the relatively short period in which DISH needs to start moving ahead on deployment), DISH will very probably need help from the FCC to push AWS-3/4 interoperability forward. However, if DISH is seen to have gamed the auction rules and secured an unwarranted multi-billion dollar discount, it will be far more difficult for the FCC to help out DISH on interoperability over AT&T and Verizon’s objections.
That might in fact be AT&T and Verizon’s ultimate goal: box DISH in with no possibility of a deal with T-Mobile or Sprint to put its AWS-4 spectrum to use, and wait for Charlie to cry uncle when he runs up against his AWS-4 buildout deadlines. Note that it is pretty much a foregone conclusion that the 4 year interim deadline to cover 40% of the population in each Economic Area by March 2017 will be missed, which will bring forward the final 70% coverage deadline to March 2020 (the timeline was extended to 8 years as part of the H-block deal in December 2013, but one year will be deducted if the interim deadline is not met).
Thus if DISH is unable to reach lease agreements with T-Mobile and/or Sprint for an AWS-4 buildout by the first half of 2017 at the latest (which will require interoperability to be secured in the next 18 months or so), Ergen will be under considerable pressure to moderate his price demands for a sale to Verizon or AT&T. As a result, AT&T and Verizon may win even more if DISH keeps the DE discount, than the $3.3B that DISH loses if the discount is rejected.
From the FCC: "In the absence of technical impediments to interoperability, if the Commission determines that progress on interoperability has stalled in the standards process, future AWS-3 licensees are hereby on notice that the Commission will consider initiating a rulemaking regarding the extension of an interoperability mandate that includes AWS-4 (2180-2200 MHz) at that time. Should we undertake such a rulemaking, relevant considerations may include considerations of harmful interference, technical cost and difficulty of implementation, and the extent to which licensees are common to both the AWS-3 and AWS-4 bands."
"Charter Communications stands to become a massive player in the cable space with its $55 billion purchase of Time Warner Cable. But the deal is taking place at a time of tremendous change for the industry — and that means Charter needs a long-term plan."
"Part of that plan may include a new, Internet-based video service and a cellular service that runs primarily on WiFi, said Charter chief executive Tom Rutledge in interviews Tuesday. Both ventures would expand on a key source of growth for cable companies — high-speed broadband — and help Charter fend off attacks by its rivals in other industries."
"We think that WiFi lends itself to the modern smartphone and smart tablet use," Rutledge said. "We want to keep deploying that where people work, where people gather, where people play. And ultimately, we could begin to sell mobile services on WiFi."
"Rutledge also hinted in an interview with CNBC that Charter might someday offer its own Netflix-like streaming video app. And, in what will likely be even shorter time frame, Charter plans to roll out a new customer interface that lists streaming video content right alongside programming from the cable lineup, blending so-called over-the-top video that relies on an Internet connection with more traditional TV offerings."
"All of that product can be integrated into our new user interface that will allow customers to seamlessly move between over-the-top and cable on every device that they own," Rutledge told CNBC."
"As consumers continue to gravitate toward the Internet, cable companies are following. And that's forcing a whole slew of changes in the way they do business. A heavier emphasis on cheap, ubiquitous WiFi will help cable companies counteract the drive by wireless carriers, such as Verizon, to get consumers watching mobile video over their own networks, for instance. And with many Americans looking forward to the end of the traditional cable bundle (in favor of "skinny" packages that offer fewer channels, but are more affordable), the cable industry is adapting by thinking seriously about Web-based streaming."
I found the link for Dan Mattio of Vulcan, to his Select Investments - Charter. The fact that Dan Mattio went to the FCC and identified himself as a major investor of GSAT and his connection to the next giant in the room - a new cable giant that could use a satellite company and all their spectrum.
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