Even as it has been making strides toward the T-Mobile merger, Sprint grew its capex $1.2 billion year-over-year for the fourth consecutive quarter as it nearly doubled the number of Massive multiple-in, multiple-out (MIMO) antennas on-air with 3,000 units deployed.
Massive MIMO is a breakthrough technology that improves network capacity and is at the foundation of Sprint’s. The company is using 64T64R (64 transmitters 64 receivers) Massive MIMO antennas in its “True Mobile 5G” network, which enables it to simultaneously deliver LTE and 5G New Radio (NR) service.
True Mobile 5G from Sprint is available in areas of Atlanta, Chicago, Dallas-Fort Worth, Houston and Kansas City, and the company expects to launch service in areas of Los Angeles, New York City, Phoenix and Washington, D.C., in the coming weeks. Once all nine metro areas are launched, Sprint’s mobile 5G network will cover approximately 2,100 square miles and 11 million people. 5G capable smartphones are being offered from LG and Samsung, and a hotspot device is available from HTC.
As it launches its own 5G network, Sprint said it continues to believe that a merger with T-Mobile is critical to accelerate the deployment of a ubiquitous, nationwide 5G network.
“The combined company is expected to have the resources and technology to build a 5G network that fuels innovation across every industry, dramatically increasing competition, unleashing new economic growth, and creating thousands of jobs and billions of dollars in U.S. economic value,” Sprint said in its press release. “Together, the combined company is expected to lead the world in next-generation technology services and applications, bringing 5G service to nearly all Americans.”
It’s not official, but it feels real. After months of speculation, Bloomberg Asia is reporting that Dish Network has agreed to buy wireless assets from T-Mobile and Sprint in a $5 billion deal creating a fourth carrier designed to convince the U.S. Department of Justice (DoJ) to bless the merger of the mobile phone carriers.
It’s not the final step before the merger of T-Mobile and Sprint becomes a reality, but it would appear to be a big one. The DoJ must still okay the merger and the states would have to withdraw their lawsuit. Then we can go back to the full-time task of wondering what Charlie Ergen will do next.
Dish would pay $1.5 billion to receive several prepaid mobile businesses and $3.5 billion for spectrum. In return, according to Bloomberg, the satellite TV provider would receive a seven-year wholesale agreement allowing it to sell T-Mobile wireless service under its brand and a three-year service agreement from T-Mobile to provide operational support.
Solving one of the final reported sticking points, Dish will not be allowed to sell the assets or hand over control of the agreement to a third party for three years, Bloomberg reported.
One of the reasons this year-plus roller coaster of negotiations feels like it is coming to an end stems from reports last week that the DoJ said it would oppose the merger, if T-Mobile and Sprint had did not finalize their deal with Dish within a week. A deadline! Who knew that would work?
New Street Research summarized what Dish will receive: 9 million prepaid subs, mobile virtual network operator (MVNO) status for 7 years, 14 megahertz of 800 MHz band spectrum and eSIM support. The firm also reported that there would be two payments: $1.4 billion now for prepaid subs and then $3.6 billion in three years for spectrum when it has been cleared.
What about Charter?
Adding another wrinkle to the story, Reuters reported that the Justice Department did not reply to Charter Communications’ proposal to buy the carriers’ telecom assets.
“The Justice Department’s lack of response to Charter could raise concerns among critics of the $26.5 billion merger of wireless carriers T-Mobile and Sprint that officials did not weigh all divestiture offers before deciding on a deal with Dish,” Reuters wrote.
And don’t forget about the lawsuit from several state attorneys general, which is attempting to block the T-Mobile/Sprint merger.
“The merger of T-Mobile and Sprint would stifle competition, cut jobs and harm vulnerable consumers from across the country, so unity among the states will be key in defending our citizens against this power-hungry corporate union,” said New York Attorney General Letitia James. It is not known whether the Dish deal would pacify the state attorney general.
Can Dish Make It as a National Carrier?
New Street Research has published analysis that shows Dish would be a disruptor in the wireless business.
“Dish has a path to an attractive wireless business on their own; one that would result in a value well above where the stock is trading today,” the analysis reads. “If they can secure a network hosting deal with T-Mobile, the business would be more valuable still. We worked with network engineers to determine what it would cost Dish to build and operate a new 5G network. We show that, once fully loaded, Dish would have a lower cost per unit of capacity than any of the four national carriers today. This gives Dish the ability to price aggressively, to fill the network swiftly, and to create tremendous value for themselves at the expense of the existing carriers.”
The news of the breakthrough that may advance the merger was welcome for the wireless industry, but unfortunately, it raises more questions than it answers. Will Dish continue to build out its license-saving internet-of-things network? The DoJ most likely will give it an extension to keep the millions of dollars of spectrum it has accrued.
“The broader question is what will they build and when will they build it?” asked Alex Gellman, CEO and cofounder of Vertical Bridge. “Will they build a 5G network and start transitioning the MVNO customers over? It makes sense if they have the freedom to figure out where most of the traffic is and can start picking off the hottest spots with their own proprietary infrastructure.” Comcast and Charter do not have the right to build their own cores as part of their MVNO deals with Verizon.
Perhaps the biggest questions that need to be answered, according to Gellman, is who does Dish partner with and when? “How quickly does Dish partner with someone to build the new network?” he asked. “Does that partner bring customers, capital or the ability to build? That is the wild card.”
But don’t hold your breath. Gellman said he believes Dish will take its time finding a partner and developing a build strategy. “They will take a measured approach,” he said. “They will get to know the Boost customers and they have seven years to use T-Mobile’s network. One thing is for sure, this deal cements the existence of a fourth carrier. Dish can no longer sell its spectrum to AT&T, Verizon or T-Mobile.
Dish Network may be the lucky fourth carrier needed for U.S. Justice Department approval of the Sprint/T-Mobile merger, according reports by the Wall Street Journal and Reuters. The announcement may come as soon as this week. Charlie Ergen has spoken about the importance of being at the inflection point of a technology change. It appears that DISH may also be at the right place at the right time.
“Dish Network is leading the race to scoop up assets that the Justice Department says Sprint Corp. and T-Mobile US must sell to save their $26 billion merger,” according to the WSJ.
The Reuters news service based its report on meetings between Dish Network Corp executives and the DoJ and the FCC. Additionally, in a federal filing, Dish explained “the need for a minimum of four nationwide mobile network operators.”
Also in the running for role of fourth wireless competitor are Altice USA and Charter Communications.
States’ Complaint Still in Play
Remember the states’ lawsuit? Jennifer Fritzsche, Wells Fargo senior analyst, said, with the states worried about a loss in competition, a fourth carrier could impress them.
“Some believe that if the DoJ approves the deal – with significant concessions that may include the creation of new national carrier – this lessens (kills?) the States’ argument that this merger will hurt competition,” she wrote in an Equity Note.
Judge Victor Marrero, U.S. District Court for the Southern District of New York, has been chosen to preside of the case. He doesn’t reportedly have a notable history of anti-trust opinions, Blair Levin, New Street Research, says he may be good for the states’ side.
“We think, however, that as a Clinton appointee, and as a person who worked in both local and state government, he is less likely to simply accept any argument from the Trump DOJ as gospel on antitrust economic analysis than other judges might,” Levin wrote in an NSR Policy note.
Stories about this on-again – off-again merger are rolling off the digital presses almost on a daily basis. As new developments emerge, such as the recent slew of suits by nearly a dozen states, one has to wonder just how this, coupled with the rest of the realities of 5G, this is going to play out in the ecosystem.
This saga, no matter how it plays out, will not likely have a direct impact on the rollout of 5G. However, the dance finale will certainly be something to behold, however it goes. For the record, I have been of the opinion that the merger will happen.
As if, the recent 5G “deployments” have not had enough disappointments. The one thing that the merger had going for it was the ability to marshal each organization’s strong suits into a really bleeding edge network. However, it is being discovered that what they’ve said they can do may be way overstated. That is why New York, and some other states, are crying foul.
Nevertheless, and all that aside, what are the real issues here. Is it a contraction of competition as the DoJ claims? I am not so sure of that. Why? Because there is no real evidence that three versus four major telecom players will change the competitive landscape all that much. While I have my opinions, as does everyone else, a recent post by an industry analyst, Kyung Mun of Mobile Experts, bring up some interesting observations. He talks about the “The Rule of Three and Four,” a business theory that hypothesizes that a competitive industry finds an equilibrium when the market shares of three competitors reach a ratio of 4:2:1. He wrote a very elegant thesis around this to make the case that the merger should happen and to explain competitive industry dynamics of why.
A year later, (a couple of weeks ago) as the T-Mo/Sprint saga drags on, he, again, wrote another elegant piece raising some very pertinent questions about why analytics sometime fail. While his missive is very well supported by analytics, I believe tried and true analytical models and algorithms, in this political environment, are not as rock solid as they once were. When you have the kind of political hip-shooting as exists in the present administration, one has to sit back and take a broader look at the ecosystem. There are peripheral factors at play in such an environment.
It appears that the DoJ, IMHO, has some political motivation behind its direction. I believe the litigating states do, as well. It is not about competition; it is about the administration’s desire to maintain the façade that it is about jobs. To wit, this is a statement made by New York’s Attorney General Letitia James. “This is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.” She goes on to say that “When it comes to corporate power, bigger isn’t always better. The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country.”
Oh really? And where does she get her facts? No one knows, precisely, what the end result of the merger will be. Will there be job losses? – of course. However, there will also be new jobs created by the merger. The loss/gain scenario exists whenever companies merge. In addition, I wonder why she did not mention what will happen to Sprint jobs if it goes out of business – will there be no job losses? If one wants to talk about job loss, look to AI. While everyone treads lightly around AI killing jobs, it is a given that will happen. A quick search of the topic will find any number of articles supporting this case.
Next, let us talk about competition. As much visibility as the two companies will be under after the merger (and the other two, as well), it really seems like political suicide to raise prices for what already exists. 5G is another story but so far, no high-value use cases are showing up. Frankly, I believe that the melding of T-Mo and Sprint will bring a stronger player to the market, actually increasing price pressure on the other two.
One point that does have merit is that one of the attorneys general investigation into the merger found that many of the claimed benefits were unverifiable and were theoretical services yet to be developed. The reference is to speed and deploy-ability. However, that metric applies to all carriers so that should be a moot point. Every carrier is promising embellished services and exaggerated performance.
I am not the only one who does not understand this team blocking by the government (remember Trumps spat with Legere and Trump calling T-Mo service terrible). I believe this is more political than economic. For that matter, so does wireless analyst Mark Lowenstein. He says he cannot see the downside to this merger. He supports his position with a number of good arguments, none of which I have room to pen here but they are easy to find.
In addition, do not forget there are other players eyeing the wireless market. Charlie Ergen’s DISH Network has spent billions of dollars amassing spectrum and it owns enough of it to build a 5G network. Plus, there is Amazon, Google and others with skin in the game.
Finally, why all this attention to wireless? There are so many other industry segments that just scream antitrust – airlines, cable, online advertising, ticketing services…the list goes on. For some reason, this has become the Oprah show of the year. I think the DoJ and suing states need to go back and reexamine their motives, and come back apolitical.
Sprint will launch its commercial 5G network beginning in May with service spreading out to nine major U.S. cities in first half of 2019, covering more than 1,000 square miles. Sprint is currently testing and optimizing its deployment of standards-based 5G software and hardware in downtown Chicago using Massive MIMO radios from Samsung Electronics America.
Chicago, Atlanta, Dallas and Kansas City are expected to be among the first cities to offer commercial 5G service; with Houston, Los Angeles, New York City, Phoenix and Washington D.C. also slated to launch in the first half of 2019. The initial 5G coverage footprint will cover more than 1,000 square miles across all nine cities.
Sprint is using Samsung’s 5G New Radio (NR) to prepare for the launch. The 5G NR solution is enabled by adding Samsung software and a channel card to Samsung’s existing Massive MIMO technology, which has been providing enhanced 4G LTE service in U.S. markets on Sprint’s 2.5 GHz TDD network since last year. This allows both 4G LTE and 5G commercial service on Sprint’s network using the ‘split mode’ capabilities of Samsung’s MIMO solution, smoothing the transition to 5G. The solution is capable of achieving more than 1.5 Gbps throughput speeds.
Sprint has deployed hundreds of Ericsson, Nokia and Samsung 64T64R Massive MIMO radios.