How will Ergen react to Sprint/T-Mobile merger?

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The FCC has approved certain modifications as part of its formal approval of the proposed $26.5 billion merger between telcos Sprint and T-Mobile. The FCC had last month agreed the outline terms in a 3-2 vote from Commissioners.

The FCC approval means that Dish/Echostar founder Charlie Ergen could now proceed and become a fourth wireless player in the US market using the divested ‘Boost Mobile’ as well as their pair’s interests in the Virgin Mobile service in the US. These will be his vehicles to exploit spectrum that he has been acquiring for years.

Dish will get 14 MHz of Sprint’s spectrum which can be added to the approximately 100 MHz of spectrum that Ergen already owns. Ergen can also access T-Mobile’s wireless towers for seven years until he builds his own distribution network. Ergen has said he will start services as soon as March 2020.

Ergen recently said: “With four [players], there’s always somebody that will be a rabble rouser,” he said. “Somebody will say, ‘I don’t have enough market share. I’ve only got 9 million subs and want 10 million.’ That person is going to be more aggressive. The guy who’s got 100 million, he’s just going to hope he holds on to them.”

Ergen will end up barely half the spectrum currently used by his new rivals. But he is backing further developments in digital compression. “We think digital compression is going to work. That’s the new architecture of how video is going to be delivered,” he said.

The regulator’s summary found in reviewing the Sprint/T-Mobile merger that it wouldn’t harm competition, with the rural buildout promises from Ergen being key. “Specifically, the Commission found that the transaction would enhance competition in rural America and among quality-conscious consumers along with strengthening competition in the home broadband and enterprise markets,” said the FCC summary.

“Specifically, T-Mobile and Sprint have committed within three years to deploy 5G service to cover 97 per cent of the American people, and within six years to reach 99 per cent of all Americans. This commitment includes deploying 5G service to cover 85 per cent of rural Americans within three years and 90 per cent of rural Americans within six years.

Good news that the FCC decision represents, it seems that at eight individual States (including New York and California) are still objecting to the terms of the proposed merger which might make obtaining licences for Ergen’s scheme a long-drawn out set of legal challenges which Ergen is well used to.


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