T-Mobile’s Business Push, Technology Advantages, and 5G Slicing with Daryl Schoolar

Full Transcript

0m10s Speaker 0

Hello, and welcome to the two hundred and twentieth episode of The Week with Roger, a conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Antner. How are doing, Roger?

0m22s Speaker 1

I'm good. How are you?

0m24s Speaker 0

Good. So Roger, it's a holiday week, and so we've got a little bit of a grab bag. I thought we could talk about a couple things. First, the DIRECTVDISH merger or unmergernonmerger as the case may be, and as well as some interesting developments with respect to T Mobile and Bead Funding. Which do you want to start with?

0m43s Speaker 1

Well, let's start with a gift that keeps on giving. Right?

0m48s Speaker 0

Right. So DirecTV made an announcement recently. What did they announce?

0m53s Speaker 1

DirecTV announced that the deal is off. If you remember, one of the things that happened was that TPG that owned the minority of DirecTV would buy the rest of it from AT and T, which happened. And then TPG would invest and did invest in EchoStar, the parent of the Dishes, right? They invested in it. And then that EchoStar would convince the debt holders to take a significant haircut.

1m27s Speaker 1

And when that happens, TPG would buy DISH satellite TV service for $1 plus the assumption of debt. And the bondholders did not agree to the offer that EchoStar and the vast majority owner Charlie Hogan made, as we predicted. And as a result, the TPG owned DirecTV pulled back from the merger or the acquisition because of the financial risk that's associated with it. And so, you know, the two guys will continue to struggle to swim individually instead of struggling to swim clinging together. I'm not sure if it actually matters.

2m17s Speaker 1

Both are declining businesses. Personally, I think in twenty five years when people of my age are dead, so will be linear television. And it's probably earlier than that. And so the days are numbered for linear television providers. And so they're milking everything that they can.

2m36s Speaker 1

And the hope was to combine the two entities and have like $4,000,000,000 of cost savings of the combined satellite provider, but that's not coming through. You know, so they bought themselves a little bit less time, right, by not doing the merger. The other overhead is there are not that many satellites left, and nobody is launching new satellites. So you know within ten years, this is probably coming to an end. Unless they launch new satellites, which are billion dollar endeavors.

3m9s Speaker 1

And so the question is, is it worth it? The answer is probably no.

3m13s Speaker 0

Well, mean, realistically, I feel like the biggest threat to satellite video is, you know, the extending reach of broadband into more and more rural places. Right? And if you can get that strong broadband connection, why do you need to use a satellite to get your TV when you can get streaming services and not have to deal with, you know, a view of the southern sky or, you know, anything else you might need.

3m33s Speaker 1

Exactly. And the combined entity was making that point in its merger preparations that their biggest competitor is not each other, but streaming providers over a broadband connection. Right. And that might be even satellite, you know, it might be Starlink, or FWA, or fiber, or cable. Right.

3m56s Speaker 1

Somehow I'm sure this is not the end of the story. There will be more to talk about.

4m1s Speaker 0

Charlie Ergen is well into his nine lives. Right? So, yeah, I think there might be a couple more twists in the story.

4m7s Speaker 1

Yeah.

4m7s Speaker 0

We'll see. Well, as you say, it's the topic that keeps on giving. Yeah. So we'll be sure to cover it as there are more developments. Why don't you tell us a little bit about T Mobile and Bead funding?

4m19s Speaker 1

So T Mobile was one of the, or is one of the participants in the Louisiana Local Fiber Consortium. And they were the biggest winner of Louisiana's Bead Awards. And they picked up $450,000,000 to cover almost 77,000 locations. You know, the second largest was Connection with $65,000,000 to cover 8,500 locations. Followed by AT and T with about 55,000,000 to cover 20,000 locations.

4m53s Speaker 1

So it's really interesting how T Mobile's strategy becomes slowly more and more apparent. And that beat is actually one of the things that they're looking at, right? And it's a really smart way of making your dollars go a long way. And, you know, we see this with the other providers, including AT and T, that are looking to expand here. But T Mobile can very well become one of the really large broadband providers in especially rural Louisiana, which fits exactly with their strategy of expanding with a converged offer.

5m32s Speaker 1

And here, in rural America, where they are less than 20% market share, compared to like 50% market share in urban America. And so this is like a really smart play for T Mobile. Mhmm.

5m45s Speaker 0

And they're continuing with the strategy of kind of partnering to do this, right? Exactly. I think that's also notable that they're not going alone. They're finding good partners to go out and build this out, which I think lowers some of the capital risk associated with this, as does BEAT funding, right?

6m2s Speaker 1

And the capital raising requirement. Even though, you know, you were there with me at T Mobile's Capital Markets Day, and they said they have a lot of money to play with, right? And now we know which games they want to play. I would expect them to become bidders in other BEAT states as well. And, you know, we thought a lot of it would be AT and T that would pick up BEAT, but T Mobile is a player here.

6m28s Speaker 0

Right. Absolutely. Well, it'll be interesting to see as more states start to kind of finalize their plans for bid and award agreements and such, the extent to which T Mobile decides to play. You know, I think we've heard pretty clearly from them that they're interested in partnering as they do this, you know, similar to how, you know, AT and T is doing this with Giga Power as well. So it'll be interesting to see how it all turns out.

6m52s Speaker 1

You have so much upside there. And it's then a much lighter capital lift than you would have otherwise.

7m1s Speaker 0

All right. Well, we'll talk to you next week.

7m4s Speaker 1

Thank you.

7m4s Speaker 0

Thanks, Roger.