T-MO SAYS IT’S A NO GO to Dish’s request to a federal court to delay finalizing their acquisition of T-Mobile’s 800 MHz spectrum tomorrow so that they can obtain a lower interest rate in the next 10 months, although Dish Chairman Charlie Ergen is well aware that the original judgment clearly outlines that it is not a permissible approach. T-Mobile says it would cost them over $530 million to hold onto the spectrum for another 300-plus days.
T-Mobile US and parent Deutsche Telecom told the U.S. District Court for the District of Columbia that Dish Network can’t shove off its requirement to finance a $3.6 billion divestiture of T-Mobile simply because interest rates are considerably higher today than they were three years ago, T-Mobile informed the federal court Friday.
Dish had asked the court to amend the final judgment dated April 1, 2020, authorizing the divestiture of Sprint’s prepaid business and 800 MHz of spectrum scheduled for completion tomorrow to June 30, 2024.
T-Mobile informed the court that Dish’s requested “relief from judgement” shouldn’t be considered because interest rates have changed..
Dish’s motion boils down to this, T-Mobile said. “Interest rates are about 5% higher now than they were three years ago, meaning that the cost of financing a $3.6 billion purchase would be about $180 million more per year than in 2020. This higher interest, according to Dish, prevents it from ‘responsibly’ financing the acquisition of the 800 MHz spectrum licenses at issue right now. Still, Dish speculates that the situation may get better in ten months,” T-Mobile said in its filing.
Judgment says ‘No’ multiple times that rates can’t be considered
In its brief, T-Mobile noted that Dish omitted any mention of the following language in the original judgment: “Defendants will not later raise any claim of hardship or difficulty as grounds for asking the Court to modify any of the provisions contained below.”
Also omitted from Dish’s motion, T-Mobile said, “is any mention of an important contractual provision between the parties that precludes Dish’s argument. In the parties’ License Purchase Agreement (“LPA”)—a separate but related agreement governing Dish’s acquisition of the 800 MHZ spectrum licenses that was approved by the Department of Justice (“DOJ”) and contemplated by the final judgment—Dish agreed that its purchase of the 800 MHz spectrum licenses ‘is not in any way contingent upon or otherwise subject to purchaser’s consummation of any financing arrangements’.”
Dish says a delay would easily cost it over $530 million
Dish’s requested extension, according to the carrier, would also impose significant and unfair burdens on the financial cost to keep and maintain the 800 MHz spectrum licenses for an additional ten months, which would be at least $215.7 million, including about $6.3 million of direct expenses for network and equipment and approximately $209.4 million for T-Mobile’s cost of capital.
In addition, T-Mobile said, that if Dish were to decide not to purchase the licenses after obtaining an extension, the value of the licenses at auction may be reduced because the licenses begin expiring in March 2028, with the vast majority expiring in June 2028, unless the holder of the licenses satisfies the FCC’s renewal requirements.
“Any buyer needs sufficient time to fulfill these requirements. Having less time available could make it more expensive to do so and less attractive to potential buyers. Delay would, therefore also likely narrow the field of potential bidders for the spectrum, as fewer potential bidders would be able to meet the build-out deadline as the time to do so decreases,” T-Mobile informed the court.
THE SPRINT AND T-MOBILE MERGER TIMELINE:
- April 29, 2018: Sprint and T-Mobile executed their merger agreement.
- July 26, 2019: The DOJ filed its Complaint and Proposed Final Judgment,
- October 16, 2019: The FCC consented to the merger, subject to certain commitments.
- February 10, 2020: The United States District Court for the Southern District of New York denied certain States’ challenge to the merger.
- April 1, 2020: This Court entered the Final Judgment, and the merger closed.
- July 1, 2020: T-Mobile completed divestiture of the Prepaid Assets, as defined in the Final Judgment, to DISH.
- June 15, 2022: DISH announced that its 5G network was offering service to more than 20% of the United States population, thereby relieving DISH of any penalty under the Final Judgment for choosing not to acquire the 800 MHz spectrum licenses.
- August 3, 2022: DISH described the 800 MHz spectrum as a “nice to have,” but not a “must have.”
- January 11, 2023: T-Mobile began outreach to DISH regarding preparing the joint FCC filings to assign the 800 MHz spectrum licenses to DISH.
- February 23, 2023: DISH again described the 800 MHz spectrum as a “nice to have,” but not a “must-have.”
- March 6, 2023: T-Mobile sent a draft of the Public Interest Statement for the FCC filings to DISH, but DISH did not provide substantive comments or engage in preparing the joint filings for the FCC.
- March 13, 2023: DISH asked the DOJ for a 60-day extension of the divestiture requirement under the Final Judgment (i.e., from July 1, 2023 to August 30, 2023) and a corresponding 60-day extension under the LPA to file its FCC application (i.e., from April 1, 2023 to June 1, 2023), noting T-Mobile’s consent to both requests.
- April 1, 2023: DISH’s original FCC application filing deadline under the LPA.
- June 1, 2023: DISH’s extended FCC application filing deadline under the LPA, which DISH breached.
- June 1, 2023: T-Mobile notified DISH that it was in breach of the LPA because it had not filed the required FCC applications and requested that DISH cure its breach within the 30 days afforded to it under the LPA.
- June 14, 2023: DISH announced that it satisfied its commitment to the FCC to provide 5G broadband service to more than 70% of the U.S. population.
- June 30, 2023: The DOJ extended T-Mobile’s deadline to divest the 800 MHz spectrum licenses by 60 days until the later of August 30, 2023 or within five business days of FCC approval of transfer of the licenses.
- July 1, 2023: Expiration of DISH’s 30-day cure period under the LPA.
- July 1, 2023 or within five business days of FCC approval, whichever is later: T-Mobile’s original deadline to divest the 800 MHz spectrum licenses to DISH.
- July 6, 2023: T-Mobile agreed not to terminate the LPA until August 11, 2023, i.e.,14 days after receiving DOJ’s position on termination of the LPA on July 28.
- July 28, 2023: After hearing from both DISH and T-Mobile and reviewing the matter for several weeks, the DOJ declined by letter dated July 28, 2023 to exercise any right it may have to withhold consent to T-Mobile’s termination of the LPA.
- August 1, 2023: T-Mobile further agreed to provide DISH seven days’ notice before terminating the LPA.
- August 10, 2023: T-Mobile terminated the LPA, effective August 17, 2023, but gave DISH a further opportunity to cure its continuing breach by jointly filing with T-Mobile the applications with the FCC.
- August 15, 2023: DISH responded for the first time to T-Mobile’s March 6, 2023 draft of the Public Interest Statement for the FCC applications by providing edits.
- August 16, 2023: DISH and T-Mobile filed applications with the FCC requesting approval of the assignment of T-Mobile’s 800 MHz spectrum to DISH.
- August 17, 2023: DISH filed the instant Motion seeking a ten-month extension of its option to acquire the 800 MHz spectrum under the Final Judgment.
- August 19, 2023: T-Mobile notified DISH that it was again in material breach of the LPA for several reasons beyond those set forth in T-Mobile’s June 1 letter.
