Boost Mobile lives on in the wake of DirecTV acquiring rival Dish TV from EchoStar. However, its competitive threat to wireless giants Verizon Communications, AT&T and T-Mobile US may not increase much near-term. AT&T stock has gained 31% in 2024, with Verizon stock advancing 19% and T-Mobile stock 28%.
AT&T on Monday agreed to sell its remaining 70% stake in DirecTV to private equity firm TPG for about $7.6 billion. That cleared the way for TPG-owned DirecTV to acquire EchoStar's video distribution business, including Dish TV and the streaming service Sling TV.
TPG will pay just $1, but assume $9.8 billion in debt. Meanwhile, EchoStar is expected to raise $5.1 billion in new capital through spectrum-backed notes.
Boost Mobile Fighting 'Uphill Battle'
"The extra cash will help Dish stay out of bankruptcy a little longer," Craig Moffett, analyst at MoffettNathanson, told IBD. "But there's not one scintilla of evidence that with an extra few billion dollars Dish can somehow succeed in becoming the fourth competitor in a wireless market that has barely grown in a decade,"
Meanwhile, EchoStar will still operate Boost Mobile while owning a broad swath of 5G wireless spectrum.
"As for 'where does EchoStar go from here,' the company can now concentrate its efforts and resources on standing up the wireless business," TD Cowen analyst Gregory Williams said in a report. "With three entrenched U.S. wireless providers, lack of retail distribution, and the potential for wireline/wireless 'convergence' to become real, Boost will be fighting an uphill battle."
Deutsche Bank analyst Bryan Kraft said in a report that EchoStar could emerge as a stronger provider on wholesale wireless network capacity, perhaps to internet and tech companies.
Verizon Stock: 5G Spectrum Purchase Unlikely
"We see little possibility of the FCC (Federal Communications Commission) approving a sale of SATS' spectrum to one of the big three wireless firms over the next few years given FCC's focus on having four major carriers to strike balance," Kraft said. The FCC is trying to encourage competition in the wireless market, Kraft added.
He added: "We think a more likely scenario (relative to a spectrum sale) is that Echostar's long planned wholesale 5G model begins to take shape. We believe that there are large companies who will increasingly want a neutral host network in the future." There they can lease a virtual slice of an MNO's (mobile network operator's) physical network and have full control over applications, data, provisioning, and security, Kraft said.
AT&T Stock: DirecTV-Dish Merger Needs Approval
A variety of U.S. regulatory agencies must sign off on the DirecTV-Dish merger. The FCC blocked a merger between the two satellite TV providers in 2002. AT&T acquired DirecTV for $48.5 billion in 2014.
EchoStar stock dived 11.5% on Monday.
On the stock market today, Verizon stock dipped a fraction to 44.81. AT&T stock also slipped a fraction to 21.85. T-Mobile stock fell nearly 1% to 204.38. EchoStar stock fell more than 4% to 23.66.
At TD Cowen, Williams said Boost Mobile will likely "no doubt continue to be focused on being the low-cost provider with $25 monthly plans." He added: "The newfound funding will be used for both network upgrades and aggressive customer marketing/acquisition."
Deutsche Bank's Kraft noted: "Competitively speaking, EchoStar has been relegated to the sidelines for the past year in both consumer and enterprise. In consumer, it lacked the capital to fund handset working capital and subscriber acquisition. In enterprise, the company didn't have the balance sheet and liquidity to be relied upon by corporate customers looking for multiyear commitments. This should begin to change."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
