Dish could look to bulk up with UScellular buy

Dish Network is interested in acquiring rival mobile operator UScellular, company executives admitted this week.

The notion hardly comes a shock, given that Dish is keen to cement its position as the fourth player in the US mobile market. But by the same token, it would also mean a significant amount of extra spend for a company that is already up against it, financially.

UScellular and its parent company Telephone and Data Systems (TDS) announced their joint decision to “explore strategic alternatives” for their wireless business on Friday. They’re not giving much away at present as to what those alternatives might look like, but naturally the industry is looking to a sale.

“The TDS board believes that now is the right time for a comprehensive review of strategic alternatives for UScellular. We will pursue the pathway that is in the best interest of shareholders,” said Walter Carlson, TDS chairman, in a statement.

Dish Network was naturally named as a possible buyer, along with the big three mobile network operators – presuming they could navigate the regulatory landscape – while the big infrastructure players doubtless have an eye on UScellular’s network of towers.

And once the question was put to them, Dish Network’s executives were pretty frank about the likelihood of it making a move, even given the lack of information from TDS and UScellular at present.

“There’s not a lot of information in the market yet as to the process,” UScellular only having announced its intentions in recent days, said Tom Cullen, EVP of corporate development at Dish Network, speaking on a conference call to discuss the merger of Dish with EchoStar earlier this week.

“Clearly they have towers and they have spectrum, and they operate in geographies that we haven’t fully built out, so it would be something that we’d be interested in looking at,” Cullen said.

The fact that the sale of UScellular assets could be on the cards is “an opportunity and a positive for where we’re trying to go,” added Charlie Ergen, executive chairman of both Dish Network and EchoStar.

“There are a lot of regulatory issues and so forth,” Ergen cautioned. The regulatory angle would be a particular problem for the bigger mobile operators, but might also come into play for Dish, he noted.

Whether Ergen’s “and so forth” also covers the financial aspects of the deal is not entirely clear, but given that he and his fellow execs were so open about their interest in UScellular, it’s safe to say that they do not see money as an insurmountable barrier.

According to the Wall Street Journal, a sizeable uptick in the share price of both TDS and UScellular followed their announcement on Friday, leaving the latter with a market cap of around US$3 billion. The telco’s annual revenue has come in at around the $4 billion mark for each of the five years, the paper added.

That’s not a huge sum in the broader context of telecoms M&A, but neither is it small change, particularly for a company that has shelled out billions of dollars on the rollout of its 5G network – and continues to do so, albeit at a lower rate – and really needs to deleverage. Indeed, its decision to merge with sister company EchoStar was largely about shoring up its balance sheet.

Cullen’s point about complementary footprints is probably the biggest draw for Dish. It needs coverage and scale if it is to compete effectively in the US mobile market and buying UScellular would be a great help on that score.

We don’t yet know when we’ll hear more from UScellular; the company itself said there is no deadline or definitive timetable set for completion of its strategic review. But it would not be wise to bet against Dish playing a part in any M&A activity surrounding it.

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