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A TV Maverick goes all-in on a new wireless game



Charlie Ergen has long tried to familiarize herself with the US wireless business. When his rivals had no other choice, the billionaire was behind

Dish Network
Corp

finally came their way.

John Legere, CEO of T-Mobile US Inc., called Mr. Ergen in late May after it became clear that T-Mobile's proposed takeover of

Sprint
Corp

was in trouble.

Mr. Ergen had been the most outspoken critic of the proposed $ 26 billion deal – a merger that would leave the US with three giant mobile companies. But Colorado Maverick also ran one of the few companies with air waves and knowledge to create a new wireless provider that would satisfy the Justice Department's antitrust problems.

Two serious attempts to combine T-Mobile and Sprint over the past five years had already failed. The third attempt was already one year old.

Mr. Doctors, an ugly leader who is known for tweets that teased fun at their rivals, were all on the phone. "Justice has said we need a fourth carrier. We should talk if you are interested," recalled Ergen.

John Legere, Managing Director of T-Mobile, spoke to Marcelo Claure, Sprint chairman and SoftBank CEO, before the start of a March House Judiciary subcommittee in Washington, DC


Photo:

Andrew Harrer / Bloomberg News

For years, Mr. Ergen had irked telecoms and federal regulators by spending more than $ 20 billion on collecting wireless licenses, but never using them. Time and again, Ergen had explored various deals, including buying Sprint himself, just to frustrate the other side. Now he was the only buyer who could build a credible fourth nationwide mobile phone operator.

"With four there is always someone who wants to be a rabble door," Ergen said in an interview this week at his office south of Denver. "Someone will say I don't have enough market share. I only have 9 million subs and want 10 million. That person is going to be more aggressive. The guy who has 100 million will just hope he keeps them." [19659004] Whether or not Dish can become a formidable force in the mature US mobile phone market, will be a key test for the landmark antitrust agreement announced Friday between the Justice Department and the companies, with the carefully crafted agreement providing 9 million of Sprint's prepaid customers – the Boost Mobile business and then some – plus the right to purchase multiple air wave licenses that can empty rural areas – it will drive Dish on T-Mobile's existing network for seven years while Dish builds its own nationwide service.

Shuffle and Deal

Under a plan approved by the Justice Department, T-Mobile and Sprint could close their coveted merger by equipping Dish with the assets to build a competition wireless network.

T-Mobile and Sprint currently use separate frequencies, which often require different cell towers

Dish hires capacity from the new T-Mobile, and creates a new carrier to service Boost Mobile customers and provide it time to build their own network.

After seven years, Dish runs his own network using spectrum from previous acquisitions and own equipment installed on fewer towers.

T-Mobile / Metro / Dish / Boost

Disassembled or upgraded

T-Mobile and Sprint currently use separate frequencies, often requiring different cell towers

After seven years, Dish operates its own networks that use spectrum from previous acquisitions and own equipment installed on fewer towers.

Dish rents capacity from the new T-Mobile, which creates a new carrier to serve Boost Mobile customers and give it time to build its own network.

T-Mobile / Metro / Dish / Boost

Removing or upgrading

T-Mobile and Sprint currently use separate frequencies, which often require different cell towers

Dishes rent capacity from the new T-Mobile , who creates a new carrier to serve Boost Mobile customers and give it time to build their own network.

After seven years, Dish operates its own network using spectrum from previous acquisitions and proprietary equipment installed on fewer towers.

T-Mobile / Metro / Dish / Boost

Disassembled or upgraded

T-Mobile and Sprint currently use separate frequencies, often requiring different cell towers

Dish rents capacity from the new T-Mobile, Create a new carrier to serve Boost Mobile customers and give it time to build their own network.

T-Mobile / Metro / Dish / Boost

Canceled or upgraded

After seven years, Dish operates its own network using spectrum from previous acquisitions and proprietary equipment installed on fewer towers.

A former professional poker player and blackjack whiz banned by some Las Vegas casinos, and Ergen co-founded Dish in 1980 after starting his career as an analyst with Frito Lay, calculating how many Doritos would fill one bag. He and his partners invested their savings and raised $ 60,000 in selling 10 foot wide satellite dish from a Denver store.

He has said that his gaming experience helped hone his business desire – knowing how to "win with bad hands." More than once, Mr. Ergen has compared his business plans with an "Indiana Jones" movie that the hero narrowly indulges in an infinite string of deadly threats.

He switched to hubcap-sized dishes and took on cable TV monopoly by reducing prices. His service now has 12 million customers across the country, and his controlling stake in Dish is worth around $ 9 billion. (He is also Chairman of the Board and largest shareholder in the sister company

EchoStar
Corp

, who run satellites.) [66] The 66-year-old usually plays by his own rules. He has led managers to share hotel rooms on business trips and made market research with what he called the "Waffle House poll", visited outlets around the country and asked customers how they used their phones and watched TV.

His famous scant ethos – he still runs to Dish's Englewood, Colo., Headquarters with lunch in a brown paper bag – is not always evident these days. The billionaire often flies in a private jet and has stopped getting employees to share hotel rooms on business trips, according to people familiar with the company.

Charlie Ergen, left, co-founded Dish Network with Jim DeFranco, right.


Photo:

Brian Brainerd / Denver Post / Getty Images

Mr. Ergen, whose core satellite TV service has lost customers, admits he is starting from behind in the mobile phone game. But he argues that it gives him an advantage. “Their legacy is mishmash. Their networks are checkered, ”Ergen said, pointing to the green checked suit. "We want to be in solid color."

The dishwasher's new network will be dwarfed.

Verizon Communications
Inc.

has almost 120 million mobile customers.

AT&T
Inc.

and the enlarged T-Mobile will each have more than 90 million. They are among the largest advertisers in the country. They hold on to their subscribers by offering unlimited data and packing free subscriptions to services such as HBO and Netflix. All three already roll faster 5G services.

"How is a company without a track record, no wireless customer and unused spectrum a more viable competitor?", Said Matt Wood, general advisor to the Free Press advocacy group, who publicly opposed the T-Mobile and Sprint agreement.

AT&T, Verizon and T-Mobile have built nationwide networks in decades over the years when they acquired competitors or new airwaves licenses. T-Mobile will now spend years integrating Sprint's networks and customers. The actors updated the equipment hanging on the cell tower and the software behind their services as they moved from 3G connections to faster 4G technology and now 5G.

Dish plans to lean on T-Mobile while building a brand new 5G network that it can roll out quickly and work differently. It also means that dishwashing should be able to roll it out quickly and operate differently. For example, Ergen said, dishwashing would be able to offer prices on request, such as charging less in the middle of the night. He also plans to target businesses, such as car manufacturers, in search of 5G connections.

"We get a place in three years that will take the other guys 10 years," he said.

A Dish Network Network Field Specialist installs a satellite TV system in a home in Denver.


Photo:

Matthew Staver / Bloomberg News

The agreement to use T-Mobil's stronger network will allow Dish to attract customers beyond the cities where Sprint mostly marketed its Boost service, he said. It also allows Dish to build its own network first in urban areas with many customers and use the T-Mobile network to reach rural areas with fewer customers.

Dishwasher will have to add towers in all the less populated and less profitable areas under the agreement it entered into with the Federal Communications Commission and Justice Department. Ergen estimates it will cost around $ 10 billion. But he will be able to compete for customers and generate cash from his inception mobile business before he has to do so.

Mr. Ergen also claims wireless pricing is broken. He says US carriers have many customers who pay for unlimited data plans they don't need, since cable companies have long forced subscribers to pay for large bundles of TV channels.

"This is deja vu again for us," said Ergen. In a wireless way, he sees an opportunity for Dish to ask customers who use smaller data with lower monthly rates and those who are heavy computer users with plans that do not slow down their connections.

AT&T CEO Randall Stephenson said this week he was not & # 39; I'm worried about the prospect of the dish jumping into the wireless market. "Our strategy is pretty good," he told analysts Wednesday. "The strategy is resilient when it comes to changes in the industry structure."

Mr. Ergen has often played the role of disruptive. In 2012, Dish introduced a DVR that allows consumers to easily skip commercials, triggering a legal challenge from broadcasters.

He often brawled over programming fees with channel owners, causing blackish on Dish's service. The company said on Friday that it stopped shipping 22 regional sports networks owned by

Walt Disney

over a contract dispute.

Dish has also gone without HBO since November, and missed the last season of "Game of Thrones." Mr. Ergen said HBO's proposal was prohibitive and called it "repayment" for the company's 2018 opposition to AT&T's acquisition of Time Warner. An HBO spokesman said the terms it provided Dish were in line with those in place for major distributors.

Dish launched one of the first live TV streaming services, Sling TV, in early 2015. With a small package of channels and lower prices, it made it easy for millions of people to cut the TV bill – even many of Dish's own satellite customers.

But with mobile service, he has annoyed federal authorities and business partners with what some called broken promises. Critics said Ergen was simply hoarding with the issued licenses while waiting for a deep-pocketed partner to buy him out. In 2015, he won FCC officials when he won a great deal of wireless licenses at government auction; His bid earned at a $ 3.3 billion discount designed to bring smaller players into the wireless industry. The FCC later rejected the rebate, a decision that is controversial. Last year, FCC officials wrote a letter threatening to claw back some parabola licenses if it failed to launch a mobile service by March 2020.

A T-Mobile store in Miami.


Photo:

Joe Raedle / Getty Images

Mr. Ergen brushes over the notion that he has sat on valuable air waves. He said he was simply overrun by Japan's SoftBank Group Corp. in 2013 when he tried to buy Sprint. He has been waiting for a catalyst that allows him to compete with anchored players. The rollout of new 5G networks is just the technology shift that makes it possible.

"Hoarding is actually a positive for our shareholders and a positive strategic move because you needed to gather range to go and compete with these guys," said. "There was nothing reasonable to build a 4G network and demolish it all next year. "

At the beginning of 2019, Dish still had no wireless customers to interrupt government concerns, and the forecast was also darkened for T-Mobile and Sprint. Their merger efforts hit in April, when staff lawyers at the Ministry of Justice, the companies reported that it was unlikely that the agreement would get its approval when it was structured.

The Ministry of Justice pushed the companies to throw enough parts of the business to create a new fourth mobile phone carrier that could enter the void left by Sprint. who had thrown customers and struggled to get a profit.

The department met representatives of potential partners, including Dish and Cable operators Altice USA Inc.,

Charter Communications
Inc.

and

Comcast
Corp

, according to people who are familiar with the conversations. Dishes appeared as an early favorite.

Share your thoughts

Could Dish succeed against bigger wireless players? Join the conversation below .

Mr. Ergen said his existing airwaves licenses made his job to build a new mobile phone operator more credible. He said he reached a broad agreement with Mr. Legere and Sprint chairman Marcelo Claure on just four weeks of discussions in June.

But the discussions continued for another three weeks when the Ministry of Justice pressed the merger partners for better terms. Government attorneys insisted that the settlement does not include any limitations on Dish's ability to sell assets, other than to pure competitors, or to find a deep-pocketed partner after the deal.

The Ministry of Justice's antitrust chief, Makan Delharim, was under the gun that government officials publicly shared the agreement. FCC chief Ajit Pai, another Trump administration manager, had already joined the T-Mobile and Sprint agreement while a consortium of Democratic Prosecutors General had filed lawsuits that tried to block it and said it would harm consumers.

The Ministry of Justice wanted to make sure that the final agreement would stand up in court if it was challenged by the states. The companies have agreed to wait to terminate the deal under a federal court hearing the case later this year.

Mr. Ergen will have to pay $ 1.4 billion for Sprint customers and $ 3.6 billion in three years for the extra air waves. T-Mobile will get most of Sprint's customers and air waves, and also have the right to purchase any dishwashing range. Sprint's owner SoftBank gets paid after failing to disturb the US mobile market. The Ministry of Justice may retain a fourth competitor.

"I think three years from now, this transaction will look better than it does this week," Ergen said. "They must have real competition."

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

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