It is well known that Las Vegas offers its visitor the ability to bet on just about anything. Well, it appears that betting mentality has seeped into our industry. There are now analysts (from the financial/investment, mostly) that are laying odds on the success (or failure) of the T-Mo/Sprint (Schmobile) merger.
Recently, Ric Prentiss, a Raymond James analyst, put the odds 55 percent. Earlier, this same analyst pegged it at 85 percent. Why the downgrade? Well, according to Prentiss, he believes Dish Network is too inexperienced to replace Sprint as a fourth carrier. Apparently, he is not all that knowledgeable about our industry.
Keith Snyder, a CFRA [Center for Financial Research and Analysis] analyst, thinks that the merger has a 50-percent chance of going through. He thinks that just because Texas entered the fray, the odds will change. Still another analyst says it is a 70 percent sure thing. Analysts at Cowen believe the states will prevail. New Street Research believes it is neck and neck. However, they are hedging their bets with “We will be re-evaluating as we read the proposed findings of fact and law, and then again as we listen to the closing arguments.”
And, yesterday morning, another opinion from an “investment” firm concerning the review of the Tunny Act and the Department of Justice. Simply put, it is just a delay for some more investigation by the court. This firm, LightShed Partners, could not resist putting in their two-cents worth on how this will affect the merger, rather than staying with what they claim to do best – analyze company performance and stock metrics, which has nothing to do with whether the merger will succeed or not.
These are classic examples of “analysts” thinking they know all about our industry. They may be good at investment strategies based on technical analyses but understanding the nuances of this kind of activity in our industry is not their best thing.
The analysts I respect the most, such as Mobile Experts, Strategy Analytics 451 Research, ABI, IHS, etc. (there are others but I know these folks) are unlikely to play this kind of numbers game. Their analysis is based upon knowing the technical side, which weighs heavily in this industry. Therefore, I do not believe these investment analysts can offer believable data in this particular vector.
One firm based their percentage on the inexperience of Dish in the wireless space. Obviously, they have never met Charlie Ergen. Just because Dish has not been a major player in wireless does not mean they cannot make it in this space. We will look at some of the reasons, shortly.
In the meantime, there is no doubt that Sprint, for all intents and purposes, is finished as a stand-alone national carrier. Unlike T-Mo, which rose like a phoenix from the carrier ashes a few years ago, they do not have an off-the-wall, yet talented and brilliant leader such as T-Mo’s Legere. Sprint just does not have the resources or talent to make a comeback. If the merger with T-Mo fails, they will, likely, go under or become a regional carrier. I believe both the FCC and the Justice Department share similar thoughts and that is why they are in favor of the deal.
The suing states are, largely, hanging their hats on the argument that three carriers would reduce competition and raise rates. There are some other tertiary arguments as well, but this is the main one. They claim that Dish would not be a significant player for some years.
I disagree. I believe that Dish is fully capable of becoming a fourth nationwide carrier, and relatively quickly. Here is why.
As I just mentioned, it is run by Charlie Ergen. If Legere has a contemporary, it is Charlie. Perhaps not as flamboyant, but equally as brilliant. As well, Ergen has been preparing for just such an opportunity for years, now.
Once the deal is inked, Schmobile has indicated it will invest up to $40 billion in network improvements. On top of that, there are those who say the merger will save them in excess of $40 billion once the tweaking is done. Such an investment, and subsequent savings, would bring on a serious competitor to both AT&T and Verizon, forcing even tighter price competition. Then, once Dish comes on line with serious coverage, these carriers would be forced to reevaluate that.
Back to Dish coming online. While there is some concern around how long it will take before they become a driving force, (four years to reach 70 percent coverage says one source) there are some elements that mitigate that.
First of all, Dish is coming into a 5G environment, cleanly. They are not being strangled by the 2/3/4G legacy albatross. Dish can come out swinging right into the next-generation ecosystem.
Dish plans to deploy 50,000 cell sites by 2025. It will also have access to the cell sites (about 35,000) that Schmobile will decommission. In the meantime, they have identified more than 32,00 towers on which they could deploy equipment, out of the gate, because they have master agreements with these tower owners.
Furthermore, if Dish does not honor its commitments to the FCC and DoJ, it faces some tough fallout including being held in contempt of court, significant fines and loss of spectrum.
And, do not forget about the $10 billion in bank guarantees that Dish has been promised.
All-in-all, this is more of a topic for speculation and wagering, than sustenance. Vegas-ing the chances of this going either way is ridiculous but gives some spice to the story.
I am entirely convinced the merger is going to go. Not for any other reason than I know the industry and its players (and the politics therein). There may be a few hiccups that arise, still, but from what data I can absorb, I do not believe the state’s issue of competition is that strong of an argument.
But, for the sake of argument, let us say the merger falls though. If one looks around the world there are plenty of “regions” to lump them all under one umbrella, that have only three carriers. Therefore, I believe that three nationwide carriers will be sufficient for a competitive marketplace (unless, of course, they all get together and price fix, which would be a very stupid move).
As well, once this is over, either way, the Three Amigos (Verizon, AT&T, T-Mo) will be under the microscope. It would be foolish of them to try anything. For the most part, this is over, except for the crying and partying when it all comes to pass.