T-Mobile US Inc. shares surged as much as 6.4 percent after a report that the fourth-largest U.S. wireless company is in talks to merge with Dish Network Corp.
The purchase price is unresolved, the Wall Street Journal reported, citing people familiar with the negotiations. John Legere, T-Mobile US’s chief executive officer, would take the top role at the combined company, and Dish’s Charlie Ergen would be chairman, according to the report.
Ergen has said as recently as February that he is interested in deals and intrigued by T-Mobile. A combination of Dish and T-Mobile could advance Ergen’s plan for streaming mobile video to challenge cable companies and employ a vast airwave holding to compete in wireless service against the two largest carriers, Verizon Communications Inc. and AT&T Inc.
“Dish investors have seen this movie before,” said Paul Sweeney, an analyst with Bloomberg Intelligence. “Charlie is very disciplined and if he does not get the exact terms he wants, he will walk away.”
T-Mobile shares increased 4.3 percent to $39.98 as of 11:20 a.m. in New York, after reaching $40.77, the highest intraday price since 2008. Dish gained 5.9 percent to $74.97. T-Mobile’s parent, Deutsche Telekom AG, rose 1.4 percent in Frankfurt trading to 15.76 euros.
Dish’s and T-Mobile’s bonds traded at a combined volume of $109 million in New York. Dish’s 5.875 percent notes maturing in November of 2024 jumped 2 cents on the dollar to 101.50, according to TRACE, the bond-price reporting system of the Financial Industry Regulatory Authority. T-Mobile’s 6.5 percent bonds -- which Standard & Poor’s grades one level higher than Dish’s -- slid 1 cent on the dollar to 104.00, a two-week low. That indicates that investors priced in greater risk for T-Mobile.
In September, after scuttling a possible combination with Sprint Corp., Ergen talked to Deutsche Telekom about his interest in a deal, people with knowledge of the matter said at the time.
Deutsche Telekom and T-Mobile representatives declined to comment on the Wall Street Journal report. Bob Toevs, a spokesman for Englewood, Colorado-based Dish, also declined to comment.
Deutsche Telekom has gained about 19 percent this year, giving the company a market value of 71.4 billion euros ($81 billion). Dish and Bellevue, Washington-based T-Mobile have a combined market value of about $64 billion, based on their closing prices Wednesday.
Ergen has said he’s looking for acquisitions that will help him put a $50 billion stockpile of airwaves to work.
“If the article proves to be correct and the companies really are in serious talks, we suspect it will flush out competing bidders, perhaps for both T-Mobile and Dish,” Jonathan Chaplin, an analyst with New Street Research, wrote in a research note.
T-Mobile last year rejected a $33-a-share bid by France’s Iliad SA and talks to merge with Sprint failed over conditions for the deal and concern that U.S. regulators wouldn’t approve a combination of the third- and fourth-largest wireless operators in the country.
In August, Deutsche Telekom senior managers discussed $35 to $40 as a realistic valuation range for T-Mobile, according to a person familiar with the matter at the time. T-Mobile’s stock has since gained about 33 percent as rollover offers and price cuts fueled subscriber growth, enabling the carrier to outpace bigger competitors.
Adding T-Mobile’s 57 million wireless subscribers would help Dish fend off gains in video-streaming customers by Netflix Inc., Hulu and Amazon.com Inc. Dish and T-Mobile had a combined $45 billion in sales and $1.5 billion in profit during the past 12 months, according to data compiled by Bloomberg.