Morningstar

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

We have doubts that the two firms will be able to reach agreeable merger terms and think that both will seek out other partners.

Securities In This Article
Comcast Corp Class A
(CMCSA)
T-Mobile US Inc
(TMUS)

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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About the Author

Michael Hodel, CFA

Sector Director
More from Author

Michael Hodel, CFA, is a sector director, AM Communication Services, for Morningstar*. He covers U.S. telecom service providers and related firms, including AT&T, Verizon, and Comcast. His team covers media companies, global telecom service providers, and owners of telecom infrastructure, such as wireless towers and data centers. The team’s research focuses on the role that evolving networking technologies, consumer habits, and industry structures play in shaping the competitive advantages and disadvantages facing firms under coverage.

Hodel joined Morningstar in 1998, initially serving within the equity data group, responsible for collecting financial information on thousands of firms. Prior to his current position, he spent two years as a portfolio manager for Morningstar Investment Management, LLC. Previously, he served as a technology strategist responsible for telecom research, chair of Morningstar’s Economic Moat Committee, and a senior member of Morningstar’s corporate credit ratings initiative.

Hodel holds a bachelor’s degree in finance, with highest honors, from the University of Illinois at Urbana-Champaign. He also holds a master’s degree in business administration from the University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst® designation.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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