This Wireless Deal Could Bring Dish Into the Telecom World

Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The satellite provider Dish Network (NASDAQ: DISH) may soon enter the telecom space if its proposed wireless broadband partnership with the third largest US carrier, Sprint (NYSE: S), works out. The Kansas carrier and Colorado-based Dish held talks regarding the deal that would give Sprint access to Dish’s unused spectrum and in exchange allow Dish offer wireless mobile services using the telecom operator’s network. The two can then divide the revenue earned from customers who subscribe for Dish’s wireless service over Sprint’s network. If this recently discussed partnership goes through, it would give Dish an entry point into the mobile phone arena.

Joe Clayton, Chief Executive of Dish denied speaking about any partnership discussions with Sprint. However, he said that the company will not take up any partnership decision until the Federal Communications Commission decides on Dish’s request of deploying its own 4G network on the recently acquired spectrum. The regulatory body is expected to discuss on this matter and make a decision on December 12. The wireless carrier preferred to remain quite as well but said that the company is always interested to build on partnerships that could give access to additional spectrum.

However, it should be noted that the proposed deal would require the approval of Softbank that has entered into a deal with Sprint to acquire 70% controlling stake in the company. Sprint has been into lot of action in the recent past as the carrier is putting in all efforts to come on track and compete with bigger industry players.

Sprint: in action
The rumored Dish deal is one of the considerations that the carrier is making to build itself strong enough and challenge the market leaders Verizon and AT&T (NYSE: T). Softbank’s interest in the carrier would lead to the much needed cash infusion of $8 billion. Sprint would use this cash to build its 4G network infrastructure and realize its Network Vision without further stressing its debt loaded balance sheet. Other than this, the company also made arrangements with spectrum rich partner Clearwire where it increased its stake to 50.8% to gain majority interest. In addition it recently invested $480 million to buy U.S. Cellular’s airwaves and customers in the Midwest. The company may also consider making a counterbid to MetroPCS, a regional carrier that has agreed to T-Mobile’s merger proposal.

Now the national carrier has set its eyes on Dish which has been longing to get into the wireless market as it wants to reduce dependence on its satellite-TV business. The subscriber base has been shrinking and so the satellite TV company wants to think on partnering with a telecom provider without building its own wireless network.

However, not only Sprint but there are others as well that wish to partner with Dish.

Others who wish Dish
and Dish were said to be in discussion recently in October to set a wireless service and contend the telecom giants of the wireless industry. However, talks did not mature further. Early this year telecom giant AT&T was also eying Dish as a source of additional spectrum to strengthen its airwaves position. The second largest US carrier appeared to be interested in getting its hands on the company’s spectrum. This was pretty obvious when the telecom carrier requested the FCC to allow the satellite provider build its own wireless network. It also asked the FCC not to impose restriction on the transfer of spectrum license to another player.

My takeaway – a win-win situation
Sprint and Dish are in the exploratory stage of their discussion and aren’t commenting on the matter until the FCC ruling. However, if the deal works out it would add on to Sprint’s spectrum position and make it stronger to combat the mounting wireless competition.  For Dish it would mean a step into the telecom industry. The satellite TV provider will not even have to build its own network infrastructure as it can offer mobile service using Sprint’s wireless network. It would be interesting to watch how the talks between the two mature. Will Dish get its debut into this wireless world? Or will discussions between the two parties get buried at the exploratory level?

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