The past week has not been good to Dish Network Chairman Charlie Ergen. Sprint may have ended the bidding war for Clearwire Corp. by upping its offer to $5 a share, 14 percent more than Dish’s latest bid, and convincing Clearwire to agree to a $115 million penalty should the deal fall through. Sprint also managed to secure investor support for the deal, which was endorsed by Clearwire’s board. Meanwhile, Dish finally surrendered in its effort to acquire Sprint, conceding defeat to Japan’s SoftBank.
So the list of potential partners for Dish Network as it tries to elbow its way into the mobile industry continues to shrink. And because Dish owns only about 40 percent of the spectrum claimed by AT&T or Verizon Wireless, as Ergen has conceded, a partner with a solid foothold in mobile would be the fastest way for Dish to take on the tier-one carriers.
A lot of unattractive options
There are several ways Dish could get in the mobile game without acquiring or merging with an established provider, of course. It could step up its efforts to acquire the spectrum assets of LightSquared, the would-be network operator that last week was accused of ignoring Dish’s current offer of $2 billion. Rumors late last year had Dish teaming with Google, which has a strong mobile presence, and building an entirely new network, perhaps buying additional spectrum where necessary (and available). Or it could try to acquire multiple regional carriers to create a semi-nationwide network with a patchwork of coverage areas, providing service akin to Leap Wireless’s Cricket brand.
But any potential deal with LightSquared or Google (or anybody else that doesn’t operate a network) would require building a network from the ground up, which is a costly and time-consuming endeavor. Similarly, cobbling together a series of regional networks via acquisition could take a long time—and wouldn’t give Dish Network the coast-to-coast network it would need to compete with the big boys. And it’s worth noting that the Federal Communications Commission’s terms of Dish’s spectrum licenses require the company to have at least 40 percent of its network online by the end of 2016, and 70 percent online three years later. So Dish’s clock is ticking.
T-Mobile USA: Getting better-looking by the day
That’s why Dish’s sights should be firmly set on T-Mobile USA. Deutsche Telekom has long wanted to unload its U.S. operation, which has been in a kind of limbo since federal regulators killed AT&T’s proposed acquisition in 2011. But while the fourth-largest U.S. carrier has long been the red-headed stepchild of mobile, but T-Mo certainly seems to be turning things around. Earlier this year T-Mobile finally began to sell the iPhone, eliminating what had been a major competitive advantage for the three larger carriers. It has substantially bolstered its spectrum holdings thanks to its merger with MetroPCS, a spectrum swap with Verizon Wireless and the airwaves it gained from AT&T as part of the terms of that failed acquisition. As my colleague Kevin Fitchard wrote a few weeks ago, the company is preparing to give its network a big boost by adding thousands of new LTE antennas to its cell towers. And while it posted a 7 percent revenue dip during the first quarter, it also demonstrated important improvements in churn and other customer numbers. I expect those figures to continue to improve thanks to T-Mobile’s “uncarrier” marketing campaign.
Dish Network may ultimately decide that the mobile landscape simply isn’t as inviting as it was a few months ago, and sell its spectrum – or even the entire company – to the highest bidder. And there’s always the chance that Dish will up its offer to Clearwire, further escalating its bidding war with Sprint. But the simplest way for Dish to join the mobile industry in a big way is a tie-up with T-Mobile. And even though she’s the last potential partner at the dance, she’s looking very good.