US satellite TV operator Dish Network Corp is in talks to merge with T-Mobile US Inc, the Wall Street Journal reported, a tie-up that would help both companies address major strategic issues.
If completed, the merger of the country’s second-largest satellite TV operator with the fourth-biggest wireless carrier would create a combined entity with market value of about $64 billion, based on the twos market close on Wednesday.
A purchase price and the mix of cash and stock used to pay have not yet been determined, the Wall Street Journal reported citing people familiar with the matter, but the two sides have agreed that T-Mobile CEO John Legere would assume the role of chief executive of the new company, while Dish CEO Charlie Ergen would be chairman.
The idea of a partnership between Dish and T-Mobile has already circled the media after Mr.Ergen last September contacted T-Mobile parent Deutsche Telekom AG about a possible merger, people familiar with the matter said at the time.
Deutsche Telekom has been looking for any tie-up that would improve profitability at its US unit. T-Mobile spent most of last year in negotiations to be acquired by No.3 US carrier Sprint Corp, but the latter backed off amid regulatory resistance as federal regulators insisted on preserving competition in the sector between the four national carriers. Meanwhile, French low-cost telecoms operator Iliad SA also abandoned its attempt to buy T-Mobile in October.
A deal with Dish, however, is much likely to secure regulatory approval as the two companies operate in different industries and a merger could create a stronger wireless rival, ultimately regulators aim. AT&Ts similar $49-billion acquisition of Dish rival DirecTV, which would create the biggest US pay-TV company, is expected to get the green light.
While Dish lacks the robust broadband Internet service that cable companies can use to offset a deteriorating TV business, it was the unexpected winner in the record-setting US sale of airwaves for mobile data in January and has amassed billions of dollars in wireless spectrum, but hasnt built the cellular network needed to use it.
T-Mobile, which doesnt own low-band spectrum, has been looking to buy spectrum from smaller rivals and can help address both of Dishs needs. Meanwhile, adding T-Mobiles estimated 57 million wireless subscribers would help Dish tackle gains in video-streaming customers by rivals Netflix Inc, Hulu and Amazon.com Inc.
T-Mobile has been increasing its customer base at the fastest rate for the industry in the recent quarters following years of subscriber losses by cutting prices, ditching two-year contracts and paying subscribers to switch from other carriers. These initiatives made T-Mobile the only US carrier to add phone customers in the first quarter of the year, putting it on track to overtake Sprint as the third-largest US carrier, although the strategy has also pressured T-Mobiles margins.
T-Mobile US Inc settled 0.8% lower on Wednesday in New York at $38.33 per share, valuing the company at $31.06 billion. Shares surged 9.63% to $42.02 by 09:43 GMT in pre-market trade on Thursday.
DISH Network Corp fell 1.24% yesterday to $70.81 on the NASDAQ, marking a one-year jump of 19.51% and valuing the satellite TV operator at $32.77 billion. Shares were up 7.68% at $76.25 in pre-market trade on Thursday. According to CNN Money, the 17 analysts offering 12-month price forecasts for DISH Network have a median target of $80.00, with a high estimate of $109.00 and a low estimate of $50.00. The median estimate represents a +12.98% increase from the last price of $70.81.
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