Department of Justice pushing T-Mobile to give more to Dish, sources say

Key Points
  • Dish and T-Mobile are near a deal with the DOJ on a hosting agreement that would prop up Dish as a new fourth U.S. wireless competitor, sources say.
  • Still, there are hurdles to overcome, such as how much capacity Dish will be able to use on a Sprint/T-Mobile network and limiting the size of strategic investment in Dish, sources say.
  • Dish will be able to use a Sprint/T-Mobile network for six or seven years before it will need to host its spectrum on its own network, sources say. 
T-Mobile US CEO John Legere testifies before a House Committee on Energy and Commerce Subcommittee hearing in Washington, February 13, 2019.
Erin Scott | Reuters

If the Department of Justice is going to allow T-Mobile to merge with Sprint, it's going to need more concessions from Deutsche Telekom.

The German telecommunications company that will control a combined T-Mobile/Sprint is in talks with both Dish Network and the DOJ on the parameters of a divestiture and spectrum-hosting agreement that will prop up Dish as a new U.S. wireless competitor. Deutsche Telekom, Dish and the DOJ are close to an agreement, and a deal could be finalized by next week, according to people familiar with the matter.

Still, there are various hurdles that must be crossed before a deal is done. The DOJ is pushing Deutsche Telekom to give Dish a sweeter deal to ensure the longtime satellite TV provider can be an effective fourth player in the wireless industry to AT&T, Verizon and T-Mobile/Sprint.

The DOJ wants Deutsche Telekom to give Dish unlimited access to its network, said the people, who asked not to be named because the discussions are private. T-Mobile has pushed back, arguing Dish should only be given access to 12.5% of the network's capacity.

Additionally, CNBC has learned Dish would have access to a combined T-Mobile/Sprint network for about six or seven years, according to people familiar with the matter. After that, Dish would be forced to move its wireless airwaves onto a network that it has built for itself. Dish doesn't have a 5G network yet but plans to build one in the coming years — an endeavor that will cost billions of dollars. Dish has said for years it wants a partner to build the network.

Given Dish's need for more capital to build a network, T-Mobile has also asked that no strategic investor take more than a 5% stake in Dish, said the people. This would limit Dish's ability to rely on a company with a huge balance, such as Google or Amazon, for capital to build a network quickly.

Dish and T-Mobile have come to a rough agreement on terms, CNBC's David Faber reported earlier on Tuesday. Those terms include a revenue-sharing agreement, said the people. Dish will also acquire additional spectrum and prepaid wireless carrier Boost Mobile from the combined Sprint/T-Mobile.

But closing the deal depends on DOJ approval and the California Public Utilities Commission. Even then, 14 state attorneys general are suing to block the Sprint/T-Mobile deal, arguing a deal would raise prices and reduce competition.

Watch: T-Mobile, Dish reached a tentative deal pending DOJ concerns

T-Mobile, Dish reached a deal pending DOJ concerns: Sources
T-Mobile, Dish reached a deal pending DOJ concerns: Sources