Dish Network Corp. is in talks with banks about funding a bid
for T-Mobile U.S. Inc. that would include as much as $15 billion in
cash, in the latest sign the takeover effort is progressing.
Dish is considering borrowing between $10 billion and $15
billion for the cash portion of a bid that would primarily be
comprised of its stock, according to people familiar with the
matter. The two sides are discussing a deal that would leave
Deutsche Telekom AG, which controls T-Mobile, with a big minority
stake in a combined company, the people said.
A deal agreement between Dish and T-Mobile isn't imminent, and
it is possible there won't be one, the people cautioned. It is
unclear how much Dish is considering paying for T-Mobile, which has
a market value of $31 billion and is the nation's fourth-largest
cellphone carrier. Dish, the country's second-largest
satellite-television provider, has a market value of $34
billion.
Still, Dish's discussions with banks, and the fact that the
structure of any bid is coming into focus, are a sign that the
company and its unpredictable chief executive, Charlie Ergen, are
moving closer to potentially buying T-Mobile after years of aborted
attempts to strike a big wireless or satellite deal. Dish has
consistently expressed interest in entering the wireless industry
and has been amassing licenses to use wireless airwaves that a
network like T-Mobile's would enable it to put to use.
Should the two sides manage to strike an agreement—and
regulators and shareholders sign off—it would accelerate
a wave of consolidation across the U.S. media and communications
industries as companies scramble to adapt to new online offerings
and keep up with rivals.
In an earlier sign that the talks are serious, negotiators for
Dish and T-Mobile already agreed Mr. Ergen would be the combined
company's chairman, while T-Mobile CEO John Legere would be CEO,
The Wall Street Journal reported last week.
But many parties have to come into alignment before a deal can
come to fruition. One of them is Deutsche Telekom, which owns 66%
of T-Mobile. The German operator has for years been seeking a deal
to combine T-Mobile with another company.
Under Mr. Legere, T-Mobile has transformed itself from the
weakling of the wireless industry into its fastest-growing national
carrier. Deutsche Telekom is likely to insist on an adequate price
given that progress, and may be happy to let T-Mobile remain
independent and potentially become more valuable, one of the people
said. Together with Mr. Ergen's reputation for tough negotiating,
that could make it difficult for the two sides ultimately to come
to an agreement, the person cautioned.
A deal for T-Mobile that involved about $14 billion in cash and
the rest stock could in theory leave Deutsche Telekom with a stake
of around 27% in the combined company, according to an analysis
done for the Journal by Moody's Investors Service analyst Neil
Begley. A buyout of T-Mobile by Dish could ultimately require a
more expansive financing package given that $20 billion of the
wireless carrier's debt could come due in the event of a change in
control that causes its credit rating to fall, Mr. Begley said.
Write to Dana Cimilluca at dana.cimilluca@wsj.com, Ryan Knutson
at ryan.knutson@wsj.com, Gillian Tan at gillian.tan@wsj.com and
Shalini Ramachandran at shalini.ramachandran@wsj.com
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