Continue Reading Below
Ergen is eyeing cash-rich tech companies including Google LLC, Apple Inc. and Amazon.com Inc. to possibly provide capital that would help finance Dish’s buildout of a 5G network, people close to the matter tell FOX Business.
|DISH||DISH NETWORK CORPORATION||36.75||+0.01||+0.03%|
|TMUS||T-MOBILE US INC||80.72||-0.86||-1.05%|
Such heavy-hitting backers could be key to both creating a wireless carrier as well as convincing U.S. District Court Judge Victor Marrero that Ergen has sufficient resources at his disposal to be a competitive force in the telecom business so he can reject a challenge by 14 state attorneys general designed to break up T-Mobile US. Inc.’s $26 billion purchase of Sprint Corp.
Ergen’s plan to create the new wireless network was the reason for the U.S. Department of Justice’s ruling to approve the deal earlier in the year, and in a closed-door meeting Wednesday that included Ergen and Marrero, the Dish chair told Marrero about possible “strategic investments” he may have secured as Marrero drilled down on Dish’s financing, these people say.
No detail was given publicly as to who these “strategic investors” may be, but people tell FOX Business some of those possible investors in Ergen’s venture include Google, Apple and Amazon.
“If you are Charlie Ergen, you would absolutely be looking at working with the likes of Google, Amazon and Apple,” veteran telecom industry executive Peter Adderton tells FOX Business. Adderton, the founder of Boost Mobile, which will be purchased by Ergen’s Dish as part of the DOJ’s deal approval, added: “Tech companies have a desire to access an open 5G network without operating one, and building one with Dish is the perfect answer.”
Ergen has been courting various tech companies for several years but his recent overtures have yet to be reported.
Press officials for Dish, Google, Apple and New York Attorney General Letitia James, who is leading the merger opposition lawsuit, declined to comment on the story but would not deny it. A spokeswoman for Amazon did not respond to request for comment.
While the exact deal terms between a tech company and Dish are still unclear, the premise of the agreement is that in return for Google, Apple or Amazon investing billions in Dish’s network, the tech companies would gain access to data on the new 5G network. It remains unclear whether the companies will in fact make the investment or how far along negotiations are.
In court, Ergen stated he has promises from various financiers for $10 billion in loans — but people close to him say he is loath to accept any deal from a bank or private equity fund because he feels the terms are too onerous. One person close to Ergen tells FOX Business Ergen has turned down at least two financing packages because these deals would force him to relinquish some of his control on the buildout process and the network.
A joint venture of sorts with Dish and a tech company could be much more symbiotic, people with knowledge of the potential financing tell FOX Business. A tech company would make an investment in the venture for access to user data — a key to big tech companies that are constantly looking to glean targeted advertising revenues.
Paying for the network has been a flashpoint between regulators at the Federal Communications Commission and Ergen, who has been promising a wireless buildout for several years without much to show for it.
In fact, FCC Chairman Ajit Pai was initially reticent to approve Ergen’s involvement in the deal, people with knowledge of the matter tell FOX Business. According to text messages revealed in court last week, head of the DOJ's Antitrust Division Makan Delrahim was involved in persuading Pai that Ergen was capable of creating a fourth wireless network.
One of the key points at the center of the case brought by the 14 state attorneys general is that by merging T-Mobile and Sprint, the telecom sector will lose a legitimate fourth wireless carrier — and higher prices for wireless services will follow. The state AGs contend that Dish simply doesn't have the infrastructure to become a competitive force in wireless by taking the place of Sprint as the nation's fourth major carrier. The state AGs filed their case to break up the T-Mobile-Sprint merger on June 11, the trial began on Dec. 9 and closing arguments will be made Jan. 15.
The costs associated with building out a wireless network will be significant since Ergen will be essentially starting from scratch. Getting a tech company with deep pockets could be critical in giving Dish credibility with Marrero, who will decide the case in the coming weeks.
"For a tech company, being involved in helping shape a new 5G network for their own needs is way better than having to deal with old, legacy-driven wireless networks,” Adderton tells FOX Business. “They can shape the network without actually having to build and run it, giving them an advantage.”