An Era Potentially Passes With Possible Dish Network Purchase of T-Mobile US

Dish Network and T-Mobile US owner Deutsche Telekom might not yet agree on much, other than that John Legere, T-Mobile US CEO, would remain CEO if Dish Network were to buy T-Mobile US.  

Important details, such as a purchase price and the mix of cash and stock that would be used to pay for any deal remain unresolved, according to a report in the Wall Street Journal.

Still, if a deal can be reached, Dish Network will have answered a key question, namely the issue of what Dish Network really intends to do about its mobile spectrum assets.

Gone would be the option whereby Dish Network simply sells off its spectrum, a prelude to an eventual sale of the remainder of Dish Network, which would not likely fare well in a market where bundles are the foundation of the consumer business and linear video revenue decline has accelerated.

Dish Network would become, for the first time in its history, a facilities-based triple play provider whose revenues are de-leveraged from entertainment video. T-Mobile US currently earns about $31 billion annually from mobile services. Dish Network earns about $15 billion, nearly all from video services.

Dish Network does sell satellite Internet access to about 591,000 customers, but the revenue is relatively insignificant. At $480 annually, Internet services might generate about $283 million a year.

So, for the first time, Dish Network would earn two thirds of its revenue from non-video sources.

For T-Mobile US, the transaction would bring much additional spectrum, get Deutsche Telekom out of the U.S. mobile market and likely make T-Mobile US among the first U.S. mobile firms to move significantly into mobile-delivered content services.

Though the structure of the U.S. mobile business would not change, the shape of the U.S. video entertainment business clearly would be different.

For the first time, most major providers in any part of the former linear video business, the mobile or fixed line communications business would be in the “triple play” or “quadruple play” bundled services business.

That had been true for the leading fixed providers for some time. But assuming AT&T’s purchase of DirecTV is approved, and if Dish Network does buy T-Mobile US, only Sprint would remain among the major firms without a linear video business component.

That should matter less as time passes and the linear video business declines.

But it is worth noting that the three to four decade period in which “satellite TV” existed as a market category would pass, just as the former “long distance company” category disappeared earlier.

As had happened earlier for telcos and cable TV companies, the era of “single product” strategies in consumer markets will have passed in the satellite entertainment business as well.
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