T-Mobile (TMUS) and Dish Network in Merger Talks
Shares of T-Mobile US Inc. (TMUS) were up +2.17 or +5.66 percent to $40.50 in Thursday's premarket after news broke earlier today that the company was in merger talks with Dish Network (DISH). T-Mobile US stock closed at $38.33 per share, down -0.31 or -0.80 percent in Wednesday's regular trading session.
Bonn, Germany based T-Mobile International AG is a holding company for subsidiaries of Deutsche Telekom AG (DTE) outside of Germany.
Meridian, Colorado based Dish Network is the second largest provider of direct-broadcast satellite service in the United States, offering television, satellite internet and audio programming to over 14 million subscribers. The company employs roughly 19,000 people and earned $944.7 million on revenue of $14.6 billion in 2014.
According to sources familiar with the matter, the two companies have yet to establish a purchase price or deal structure and neither company was willing to comment on the potential merger. However, sources say that both companies have already agreed that T-Mobile's Chief Executive Officer John Legere would be the Chief Executive of the combined company, while Dish Chief Executive Charlie Ergen would serve as the combined company's chairman.,
The merger talks follow last year's failed attempt by Sprint Corp. (S) to buy T-Mobile from Deutsche Telekom AG after regulators balked at the merger. Another company, Iliad SA from France also retracted their bid for T-Mobile US in October of 2014.
The potential merger would combine T-Mobile's 39 million customers with 13.8 million Dish satellite TV customers along with 591,000 subscribers to Internet services. A merger of the two companies follows AT&T's acquisition of DirecTV for $48.5 billion and the $66 billion in transactions by Charter Communications (CHTR) in its bid to merge Bright Networks and Time Warner Cable (TWC).
Renewed interest in merging the two companies came about after the Federal Communications Commission's auction of radio spectrum to transmit wireless data in January. Dish Networks was the second highest bidder having spent $13.3 billion on radio frequencies, which could potentially be used to build its own wireless network that could rival other major cellular providers.
Dish Networks previously attempted to enter into the wireless industry in 2013. The company tried to take over Sprint, but was outbid by Japanese company Softbank. Softbank wound up buying Sprint in a $21.6 billion deal. T-Mobile, for its part has been trying to buy spectrum from other smaller companies. A merger with Dish would ultimately provide T-Mobile with considerable spectrum resources.
The stocks of both companies were higher in this morning's premarket, indicating that investors are on board with the potential merger. The talks are still in their early stages and a deal may not materialize. Nevertheless, the likelihood of a merger is high given the consolidation of the industry through the AT&T and Charter deals.
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