As negotiations between T-Mobile and Dish Network continue, Boost Mobile appears to be suffering the consequences as its handset inventory reportedly languishes.
As part of the government's conditional approval of the T-Mobile/Sprint merger, Dish is supposed to buy Boost for $1.4 billion. It was widely expected to close by June 1, but technically, it has 90 days since the April 1 filing of the consent decree, so it’s now expected to close July 1.
Dish declined to comment and T-Mobile didn’t respond to a request for comment, but the lag time does not help Boost and its dealers.
“Handset inventory at Boost is constrained,” said Jeff Moore, principal at Wave7 Research, which conducts regular channel checks of the prepaid market. The lag in handset supply is not blamed on the COVID-19 pandemic.
The reason for the constrained inventory? T-Mobile isn’t likely to order more phones for Boost, a business that it isn’t going to have much longer if it abides by the terms of the government’s merger approval. A lot of prepaid handsets are subsidized and Moore said T-Mobile would take a hit by ordering them and then selling them at a subsidized rate in the near term without later getting revenues from the service plans customers pay in the months ahead.
Boost founder Peter Adderton, who sold the business years ago but continues to advocate on its behalf, also said he heard from dealers that inventory for Boost’s handsets is the lowest in 10 years.
Adderton posted a section of a letter on Twitter this week that he said was sent from T-Mobile to Boost employees telling them that divestiture transition activities were put on hold due to disputes between T-Mobile and Dish.
Adderton told Fierce his biggest concern in the protracted negotiations is the impact on Boost dealers, employees and prepaid consumers. “The whole concept of the divestiture of Boost was to ensure that there was competition in the prepaid market, and this clearly doesn’t look like prepaid and Boost are the priority. It seems to me that Boost looks like a pawn in a bigger game.”
Recon Analytics founder Roger Entner suggested a similar theory. “Usually it doesn’t help subscriber figures when you have an asset in limbo,” he said. If Boost loses customers, that could be used as a bargaining chip for a lower purchase price.
Analysts at LightShed Partners earlier this week said the terms of the Boost deal seem pretty clear, and it’s hard to imagine a revision that would not have Dish paying the agreed upon price of $1.4 billion. “The Covid pandemic or erosion of Boost’s business are not sufficient to change or break the deal based on our reading of the terms of the agreement,” wrote analysts Walter Piecyk and Joe Galone.
Entner said he believes Dish ultimately will end up with Boost. “The question is for how much and in what condition,” he said. If it goes into arbitration, time is on Dish Chairman Charlie Ergen’s side, and not T-Mobile’s. Ergen is well-known as a tough negotiator and will play the long game. “You always have to be very careful with Charlie."