Feb 18, 2020 (Market Realist via COMTEX) -- The US wireless phone market is about to change in a major way due to Dish Network (NAS:DISH) . Last week, T-Mobile (NAS:TMUS) and Sprint won court approval to proceed with their merger, which will benefit Dish.
T-Mobile and Sprint agreed to sell some of their wireless assets to Dish. The company will use the assets as a springboard to launch its wireless operation.
Dish will join cable providers Comcast, Charter Communications, and Altice USA. They have also launched wireless operations in a bid to diversify their revenue sources.
T-Mobile attempted to curb Dish wireless
Notably, Dish needs $5.0 billion to purchase the assets that T-Mobile and Sprint will divest. Also, the company will need about $10 billion to build a nationwide wireless network.
The company's wireless venture will require an investment of about $15 billion. However, Dish doesn't have that much readily available . The company will have to borrow or bring in partners to help fund its wireless venture. Banks are willing to extend as much as $10 billion in loans to Dish for its venture. But bringing on board equity partners would be a cheaper way to raise funds for the business.
T-Mobile wanted to slap Dish's venture with certain restrictions . For example, the company sought to limit the stake Dish could sell in its wireless business to 5.0%, according to The New York Post . Doing so would restrict the company's ability to raise equity financing for its wireless venture. Such a financing curb could force Dish to borrow large sums to plug its funding gap.
But taking huge debt could strain Dish's balance sheet for a long time. The strain could delay the realization of benefits from the wireless business. T-Mobile didn't succeed in its attempt to curb Dish's equity fundraising for its wireless business. Dish is free to sell up to a 50% stake in its wireless business. However, Dish can't partner with T-Mobile's existing rivals like AT&T or Comcast.
Dish has considered bringing technology giants Amazon (NAS:AMZN) and Google (NAS:GOOGL) as partners in its wireless venture . Amazon finished 2019 with $36.4 billion in cash reserve . Google parent exited the year with $120 billion in cash reserve . Therefore, the deep pockets could help Dish realize its wireless dream.
Shrinking traditional pay-TV market
Dish's move into wireless comes as its main pay-TV business shrinks amid the rise in online video streaming. The company has been losing subscribers from its legacy satellite television business.