We Wouldn’t Bet on Dish Network, T-Mobile Merger

The Wall Street Journal has reported that

A merger of Dish and T-Mobile would make some strategic sense, as T-Mobile would benefit from access to Dish's large spectrum holdings. However, T-Mobile's biggest spectrum need is in lower frequency bands, not the higher frequency licenses Dish holds. As such, we believe T-Mobile's top strategic priority, as it relates to spectrum, should be the upcoming broadcast spectrum auction, an event that will require significant capital. Merging with Dish, even in an all-cash deal, would create a highly leveraged firm lacking the balance sheet strength to bid aggressively. The combined firm would also lack the financial strength to aggressively build out Dish's spectrum holdings, which is important given the buildout requirements on these licenses. We aren't convinced that adding Dish's satellite television customers to T-Mobile's wireless business adds much long-term strategic value.

In our view, T-Mobile's best M&A option is to tie up with a financially stronger firm that possesses fixed-line assets.

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