Dish Network Chairman Ergen to take stand and defend T-Mobile/Sprint merger
Once again all eyes are on Charlie Ergen.
The volatile Dish Network Chairman, who was the linchpin of the U.S. Department of Justice Antitrust Division's decision to approve the $26.5 billion T-Mobile US, Inc. purchase of Sprint Corporation is expected to take the stand and testify in Federal Court Tuesday, and argue that a coalition of state attorneys general should not be allowed to block the controversial merger.
Ergen was central in the DOJ's decision to allow the merger by agreeing to purchase spectrum from the carriers and start a new, fourth wireless telephone company to address antitrust concerns that the deal would eliminate a major provider and lead to higher prices for consumers.
Now Ergen is back on center stage; he's considered the top witness in persuading Senior U.S. District Judge of the Southern District of New York Victor Marrero to ultimately approve the deal by rejecting the government's argument that Dish's wireless company makes for a weak competitor.
On the stand, he's expected to say that Dish will be ready as a major competitor "on day one," which roughly translates to early 2020, said a person with knowledge of Ergen's testimony preparation.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TMUS | T-MOBILE US INC. | 237.75 | -3.13 | -1.30% |
| S | SENTINELONE INC | 27.36 | -0.32 | -1.16% |
| DISH | NO DATA AVAILABLE | - | - | - |
A Dish spokesman had no comment. A spokesman for New York Attorney General Letitia James, who is leading the AG court case to block the deal, had no comment.
Under the terms of its deal with the DOJ, Dish will acquire spectrum to start a new wireless carrier and prepaid businesses including Boost Mobile and Virgin Mobile. Dish will act as a reseller — providing wireless services to Boost and Virgin customers by using the new T-Mobile's network. Dish has made a number of other commitments as part of its agreement with DOJ, including building out its ultra-fast 5G network by 2023.
In preparation for his testimony tomorrow, Ergen has been practicing with T-Mobile attorneys to make sure he adequately reinforces the company's principal argument: That its purchase of Sprint won't lead to price increases since Dish is entering the wireless business as a fourth competitor.
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One of the key points at the center of the case brought by the 14 state attorneys led by New York AG James and California AG Xavier Beccera 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 AG's 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.
Not only will Ergen need to defend Dish's ability to compete in the long-term, he will also need to show that he can provide quality service to prepaid customers through its purchase of Boost Mobile, which was part of the DOJ settlement. Prepaid services are wireless deals targeted for low-income people, and some industry observers are dubious that Ergen has a plan and will actually follow-through on serving prepaid customers or building out 5G.
"Ergen is going to come out swinging with his hands tied behind his back," Boost Founder Peter Adderton tells FOX Business. "Ergen can't compete with T-Mobile's prepaid brands but nobody is mentioning prepaid at the trial."
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The state AGs filed their case to break up the T-Mobile-Sprint merger on June 11, and the trial began on Dec. 9. Current T-Mobile Chief Executive Officer John Legere and soon to be T-Mobile CEO Mike Sievert testified last week. Sprint Chairman Marcelo Claure and Sprint CEO Michael Combes testified Monday.
Several people close to the companies tell FOX Business they are cautiously optimistic the judge will be receptive to their case. In one round of questioning, Marrero appeared to criticize one of the AGs key economic analysts who tried to argue that T-Mobile’s competitors — AT&T Inc. and Verizon Communications Inc. — won't look to cut prices in order to compete with the newly merged entity.
Whether Ergen can persuade the judge of his ability to compete remains to be seen. The Dish chair is known for his capricious negotiating style leading some to believe he may pivot from the talking points he’s been prepped on.
