T-Mobile US (NASDAQ:TMUS) always seems to be the bridesmaid, never the bride. The wireless operator had a proposal from AT&T slapped down in 2011 over regulatory concerns. Another merger with Sprint (NYSE:S) never even reached the "official bid" stage before shutting down for similar reasons. So why would a tie-up with DISH Network (NASDAQ:DISH) fare any better?
That's the next suitor lined up outside T-Mobile's door, according to a Bloomberg report.
Bloomberg's anonymous insider sources say that DISH Chairman Charlie Ergen has been talking merger opportunities with T-Mobile parent Deutsche Telekom AG. When the Sprint combination fell apart untested, Ergen approached DT's leaders with another pairing plan.
The satellite TV broadcaster hasn't made a formal offer yet, and Ergen has not yet hired a bank to serve as a deal advisor. Ergen's interest may hinge on the outcome of a radio spectrum auction in November, Bloomberg's sources say. Ergen's interest in T-Mobile is not exactly news, but his meetings behind the scenes with Deutsche Telekom added another level of seriousness to the rumors.
Furthermore, DISH would have to beat French telecom Iliad. The owner of a low-cost French network under the Free brand already had one T-Mobile bid rejected but is regrouping for another try with the backing of several private equity firms.
And of course, both companies (and any other dark horses in the T-Mobile race) must meet Deutsche Telekom's $35 target price per T-Mobile share. Sprint's stillborn proposal topped $40 per share, and Iliad's first try stopped at $33 per share.
Let's say Ergen gets serious about T-Mobile. Then what?
What sets DISH apart from all the other T-Mobile suitors, past and present?
First, you should recall that Ergen and DISH made a serious run for Sprint last summer. The company really wants a wireless presence. Lacking a broadband data component, the satellite business is starting to look outdated. But Japanese billionaire Masayoshi Son and his company, Softbank, won that bidding war.
DISH owns a plethora of wireless spectrum licenses across the country and is likely to bid on more in the upcoming auction. But the company needs help to unlock the value of these spectrum assets. Acquiring an established wireless player on a nationwide scale would get that done, followed by a few simple adjustments in Sprint's or T-Mobile's radio towers.
Much easier than building a national network from scratch. And then DISH would be free to start an Internet-based broadcast and broadband network, to supplement the stale satellite business.
So Ergen has the proper motivation to get a deal done.
OK, but what about the regulators?
It's true that the FCC and the Department of Justice have shut down or discouraged two T-Mobile deals out of existence already. Why would a DISH bid be any different?
When AT&T was T-Mobile's suitor, both regulators and telecom rivals worried about negative effects on the American wireless market. In particular, merging two of the nation's four largest networks into a single business would reduce competition in the wireless space.
A legal document, leaked by mistake in August 2011, showed that the deal was more about reducing competitive threats to AT&T than about improving services as Ma Bell said in public. That was arguably the end of AT&T's buyout attempt.
As for Sprint, Masayoshi Son's argument was that three very large networks would provide more competition than two giants and two relative minnows. But regulators weren't buying that argument, and Sprint shut down its bidding process as talks with the FCC and DoJ stalled.
DISH won't face the same scrutiny. This time, the FCC isn't asked to put two wireless businesses together. Instead, DISH would enter a whole new set of operations with T-Mobile under its wing. And the satellite network would bring its own cache of wireless licenses to the party, adding some weight to the idea of improving the situation for current T-Mobile subscribers as well.
The Foolish takeaway
So, I would argue that DISH could make it through the maze of regulatory approval processes, entering the wireless market at the finish line.
It wouldn't be a slam-dunk approval, of course. There are many ways to topple DISH's interest in T-Mobile. Fortunately, the antitrust and anti-competitive concerns that stopped AT&T and Sprint simply won't be relevant this time.