To sell regulators on their $26 billion mega merger, T-Mobile and Sprint executives told anyone who’d listen that the deal would provide near-miraculous benefits. But economists warned that US telecom merger promises are historically meaningless, and the reduction in overall competitors would — sooner or later — result in higher prices and job cuts.
Instead of heeding their warnings and blocking the deal, US antitrust enforcers concocted an elaborate workaround: they would erect Dish Network as the nation’s new fourth major wireless carrier. Under the plan Dish received some T-Mobile spectrum, the Boost Mobile prepaid brand, and the assurance that T-Mobile would help Dish run a Mobile Virtual Network Operator (MVNO) while it got its own nationwide network up and running.
But squabbling between the companies culminated this week in Dish announcing it would be replacing T-Mobile with AT&T as its primary partner, indicating that T-Mobile and Dish were simply incapable of getting along, and the government was never that interested in forcing them.
“If T-Mobile is able to shirk this regulatory obligation with impunity, what’s to prevent future consent orders from being ignored?” Hal Singer, an economist who testified against the merger approval tells The Verge.
Earlier this year, Dish called T-Mobile a “grinch” for shutting down its CDMA network earlier than Dish had expected. In complaints to state and federal regulators, Dish accused T-Mobile of reneging on its merger promises, and claimed the shutdown risked leaving many of Boost’s 9 million wireless customers without service in 2022. T-Mobile has denied fault and effectively accused Dish of not understanding its own agreement.
So far the Biden administration, focused largely on Big Tech policy conversations, hasn’t taken much action in the telecom space. The administration has yet to fully staff the FCC, and only just appointed a DOJ antitrust enforcer this week. Dish’s deployment goals are far off, and any meaningful government action, if it comes at all, likely remains years away.
The deal gives Dish until 2025 to deploy its wireless network to 70 percent of the population. Given that 70 percent of the US lives on roughly 3 percent of the country’s landmass, that shouldn’t have been a particular challenge. (Dish hasn’t given any public indication that it’s nearing that goal yet.) But it’s getting to 95 percent coverage where Dish needs help, given that the remaining chunk lives on ten times the land mass as the initial 70 percent.
That’s where Dish’s $5 billion deal with AT&T comes in. Under the proposal, AT&T will grant Dish MVNO customers access to AT&T’s 4G and 5G networks in rural and harder to reach markets, as Dish focuses on building out its own 5G network in major cities. Dish will still have access to T-Mobile’s network until 2027, but AT&T will now be Dish’s primary partner.
In a research note to investors, Wall Street analyst Craig Moffett argues that while Dish’s relationship with T-Mobile may have soured, the deal with AT&T likely increased Dish’s chance of survival as a wireless operator — for the time being.
“Under the T-Mobile agreement, Dish had until 2025 to satisfy the FCC, but only two more years afterwards to satisfy the much more exacting demands of customers,” Moffett says. “That was always the real challenge.”
Given that AT&T has never offered CDMA access, the arrangement won’t solve Dish’s complaints about T-Mobile’s decision to shutter its CDMA network, potentially harming Boost Mobile subscribers. AT&T, meanwhile, nabs significant wholesale revenue with the dangerous bet that Dish will never become successful enough to erode AT&T market share.
But with Dish bleeding wireless and TV subscribers at an alarming rate, the clock is ticking on Dish’s overall survivability. In the next six years, Dish has to remain financially viable, build out a massive and popular next-generation wireless network, keep state and federal regulators happy, and somehow steal meaningful market share from a US telecom sector historically averse to being meaningfully disrupted by competition.
It’s a big ask for a company long criticized — including by T-Mobile in 2018 — for gobbling up troves of valuable spectrum, then not delivering on its promises to put that spectrum to use. While the government deal bars Dish from selling its spectrum for six years, analysts have long pondered if Dish will just string regulators along, sell its spectrum, then use the immense profits to laugh off any remaining regulatory, legal, and contractual obligations.
Moffett tells The Verge that Dish has already spent upward of $10 billion in long-term cellular tower leases, and risks losing its spectrum in addition to financial penalties for missing deployment goals. Singer, however, remains unimpressed by the integrity of the merger arrangement with the government and still thinks an early Dish exit remains possible.
“The decree always gave Dish an easy out,” Singer says. “The real target of the regulation was T-Mobile. And now T-Mobile is getting to slither out.”
The saga could also end with AT&T buying Dish Network, AT&T nabbing Dish’s vast spectrum holdings, the US wireless industry consolidating even further, and everybody involved pretending none of this ever happened.
Meanwhile, other merger promises remain unfulfilled. T-Mobile’s promise that the deal would create new jobs — still viewable over at the company’s website — wound up not being worth much. Despite claiming the deal would be “jobs positive from day one and every day thereafter,” the company has eliminated 5,000 positions so far, much as critics like Singer predicted.
Historically, antitrust enforcers are supposed to look at the available evidence of a proposed union and act accordingly. In the case of Sprint and T-Mobile, the Trump FCC approved the deal before even seeing impact analysis, and the Trump DOJ’s top antitrust enforcer Makan Delrahim personally worked with all three companies to ensure deal approval.
Instead of simply blocking the merger and finding a way to prop up Sprint, the resulting solution always required a great deal of optimism in both the integrity of corporate merger promises and the competency of US regulators. Now consumers are left waiting for a network that may never arrive, based on relationships that were sour from the start.
“Just as Delrahim scripted it,” Singer jokes.