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According To Reports, Dish Agrees To Pay $5 Billion To Create A New Prepaid Carrier

t mobile and sprint

The $26.5 billion merger between T-Mobile and Sprint is about to begin. This morning that Dish Network will pay a total of $5 billion to create a new prepaid wireless service provider. $1.5 billion will go to a seven-year MVNO agreement with T-Mobile that will allow Dish to sell the wireless service using the T-Mobile network. For three years, T-Mobile will support Dish to facilitate the transition of prepaid T-Mobile-Sprint subscribers to Dish. To protect T-Mobile, Dish cannot change these resources or deliver the agreement to a third party for three years. The remaining $3.5 billion that Dish will pay to T-Mobile will go to the acquisition of the spectrum from the satellite content provider.

The agreement between T-Mobile and Dish is important because it allows the Justice Department to approve the merger between T-Mobile and Sprint. This agreement announced on April 29, 2018, has already been approved by the FCC. And although the DOJ was inclined to block the merger, it agreed that the configuration of Dish as a new competitor in the sector would have allowed the regulatory agency to approve the transaction. The agency is responsible for ensuring that the competitive landscape of any industry remains the same after a merger. The official approval of the Justice Department could arrive as soon as tomorrow.

It is expected that T-Mobile will announce that the agreement with Dish will not change its expectations on the $43 billion savings it will get from the merger. But the combination of the third and fourth-largest wireless service provider in the nation is more than a money saver. With the transaction, T-Mobile will take control of the Sprint holdings with a medium-range 2.5 GHz spectrum. Together with the low-band T-Mobile 600MHz spectrum and the very high waves of mmWave, the 2.5 spectrum GHz will help the wireless service provider build a national 5G network. When the agreement was first announced, both companies felt the combination was necessary for the US to take global leadership in 5G. With a download speed ten times greater than 4G LTE, the next generation of wireless technology should lead to new sectors and companies once a coast-to-coast network is created. T-Mobile CEO John Legere repeated this discussion as recently as last month.

Investors Are Optimistic That The Deal Will Be closed

T-Mobile and Sprint

Those who contested the merger complained that it would lead to job cuts, as outlets and redundant positions are eliminated. But last October, Legere stated that the transaction would indeed result in more jobs immediately after the deal was closed. The executive called the merger “unique” and stated that by 2024 11,000 new jobs would be created. Last August, the Communications Workers of America (CWA) reported that the agreement would have resulted in the loss of 28,000 jobs.

The Justice Department had previously blocked the $39 billion merger of AT&T and T-Mobile that would have created the largest wireless operator in the US. As the deal was not concluded, T-Mobile received a breakup package that included $3 billion and 128 AWS markets including 12 of the country’s 20 largest metropolitan areas. This package has helped T-Mobile to start a transformation that has transformed it from a last-minute idea in the industry to the most innovative and fastest-growing of the four major wireless service providers.

Under the terms, Sprint shareholders will receive .10256 of T-Mobile shares for each Sprint share they own. Currently, T-Mobile shares are trading at $ 79.89, an increase of $ 1.25 today. Sprint shares are trading at 7.6% or 53 cents at $7.62 per share. If the agreement were concluded today, each Sprint shareholder will receive $8.19 in T-Mobile shares. The margin of 57 cents between the price of Sprint shares and their theoretical value is the lowest at some point and indicates a strong optimism on the part of investors that the agreement will be closed. However, it still needs to be addressed, it is the case brought by several attorneys general who is trying to block the merger. A trial will not start before October, although the judge has not issued a temporary restraining order that prevents the signing of the merger agreement.

(Via: Bloomberg)

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