"Dish and [T-Mobile], that makes some sense," T-Mobile CEO John Legere told investors at a Deutsche Telekom event. "It makes some sense from a standpoint of integrating that spectrum and capability and deploying it on our network, and then looking at how you merge some of the content distribution and mobile devices and their base of customers as well. So, yeah, take a look."
The two sides are reportedly talking, but mutual interest and the fact that the companies are a nice fit may not be enough to make something happen. It's possible that price could be the sticking point and Deutsche Telekom, the majority owner of T-Mobile, has deep enough pockets to move slowly.
While it waits, the parent company is likely to listen to a number of offers for its increasingly valuable wireless property. That could create a bidding war or it could help Deutsche Telekom extract the best price possible for T-Mobile.
The DISH deal seems like a foregone conclusion because the two companies are a cultural match that market their products as being alternatives to the established leaders in their respective fields. But that compatibility does not guarantee a deal, and T-Mobile could end up being snatched up by another company.
Is Comcast a contender?
Fresh off its failed merger with Time Warner Cable, Comcast (NASDAQ:CMCSA) has reportedly had discussions with Deutsche Telekom about buying DISH, Reuters reported. Those talks, if they actually occurred, may have just been a polite back and forth because the cable giant does not seem interested.
Though the company has not made a formal denial of the discussions, a Comcast source told Ars Technica that the cable and Internet provider was not interested in T-Mobile. Instead, the company intends to continue to focus on its deal to resell Verizon wireless in bundles with its cable, Internet, and home phone services.
Another phone player may be in the mix
While Comcast does not seem like a serious contender, America Movil, which is owned by Mexican billionaire Carlos Slim, could be interested, according to Geekwire. The company already owns Tracfone, a prepaid wireless service that has 25 million subscribers who are "mostly on the AT&T network," according to the tech site.
Those customers could be moved to the T-Mobile network or even ultimately be switched to the company's similar prepaid brand MetroPCS. It's a logical match in that Slim has deep pockets and T-Mobile could market its relatively upscale products to the TracFone user base. Adding 25 million paying customers (a little under half of what T-Mobile has) does add volume, which helps spread the cost of network upgrades over more customers.
T-Mobile can be picky
The best thing for Deutsche Telekom might be to wait. T-Mobile has been leading the wireless industry in growth and it will (if it hasn't already) pass Sprint to become the number three wireless carrier in the U.S. There's no reason to believe it won't continue that growth for the relative long term, which means that as time goes on the company should be worth more.
Ultimately a sale or merger probably makes sense. T-Mobile either needs more wireless customers to make growing its network, purchasing spectrum, and making the other capital investments required to compete pay off, or it needs more products to market to its existing customers. It's a matter of scale and the easiest way to achieve that is to make a deal.
DISH still seems like the best fit as the brands could leverage their user bases to sell more products and the satellite TV provider already owns wireless spectrum, which it needs to use or it loses the rights to it. The logic of that deal should eventually pull the two companies together, but it's not impossible that America Movil will step in and make Deutsche Telekom an offer it can't refuse, which DISH won't match.