T-Mobile (TMUS 0.84%) and Sprint (S +0.00%) continue to work toward getting all the necessary approvals for their $26 billion megamerger, which will likely include several divestitures intended to reduce potential competitive harm to the industry. The Department of Justice reportedly wants T-Mobile and Sprint to divest enough spectrum assets that could pave the way for the creation of another fourth national carrier, as the merger would eliminate the fourth. DISH Network (DISH +0.00%) has emerged as a top bidder, even though the satellite TV operator is already hoarding considerable wireless spectrum.
Over the weekend, news broke that Alphabet (GOOG 0.84%) (GOOGL 0.59%) subsidiary Google may be interested in helping to create a fourth national carrier.
Sprint Executive Chairman Marcelo Claure and T-Mobile CEO John Legere. Image source: T-Mobile.
Talking with DISH
The New York Post reported yesterday that Google is in discussions with DISH, with Alphabet director Alan Mulally spearheading the negotiations. The highly respected ex-CEO of Ford had joined Google's board of directors five years ago. Google already has a mobile virtual network operator (MVNO), Google Fi, which has been around since 2015 and uses T-Mobile's and Sprint's networks, among others. Regulators have previously expressed concern about how the merger could adversely affect wholesale pricing and the MVNO market.
T-Mobile majority parent Deutsche Telekom isn't keen on the idea of Google jumping directly into the wireless industry and wants to impose conditions on selling assets to DISH, such as a commitment not to sell over 5% of itself to any potential partners, according to the report. That proposed condition seems unlikely to become part of the final deal.
Google say it's not trying to create a network
Google has outright denied the report. "These claims are simply false," a Google spokesperson told the outlet. "Google is not having any conversations with Dish about creating a wireless network."
It's common for companies to deny reports like this. Google undoubtedly has a vested interest in how the T-Mobile and Sprint deal plays out, since it could potentially be on the hook for higher wholesale pricing in the future. T-Mobile CEO John Legere has previously said the partnership is "highly profitable" for the Un-carrier. Google Fi's aggressive pricing could potentially be at risk if wholesale prices went up.
Google has never disclosed how many Fi subscribers it has, but there should be little doubt that the subscriber base is fairly small. The company has historically only supported a very limited number of devices, although it recently expanded support for iPhones in an effort to broaden Fi's appeal.
Partnering with DISH could give Google more options for its MVNO, while also giving it greater flexibility with its Google Cloud platform. If Google isn't in talks with DISH, it should be.
