With their business models broken and the government on to their game of unregulated monopoly, Verizon (VZ) and AT&T (T) are desperately looking to mergers for relief.
DISH Network (DISH), still trying to get past DirecTV (which has better satellite slots and better line-of-sight to American roofs), is said to be seriously eying T-Mobile if its deal with AT&T collapses.
Combine the break-up fee with what DISH could pay and the Germans would be happy. Add T-Mobile's spectrum to some DISH acquired in bankruptcy and it would be a direct competitor to both Verizon and AT&T, not to mention Comcast (CMCSA), with digital phone and video on the lowest-cost platforms available.
DISH is already getting into the broadband Internet game with its Blockbuster movie pass offering. DISH asked the FCC to see its findings on the AT&T-T-Mobile deal last month to get a better handle on the regulatory risks. The hope is it could become an Internet-video service, going “over the top” of existing ISPs and bypassing cable.
But DISH investors are voting no on this idea. The stock passed technical support to the downside yesterday. The reason is obvious. A deal might take years to close, DISH would be taking on assets with a sketchy value, and it would be fighting competition on multiple fronts.
Verizon, meanwhile, is said to be eying Netflix (NFLX) for a possible takeover. (Or it could go cheap and buy CoinStar, which is looking at streaming as an adjunct to its kiosks. That deal looks like a head fake.)
Porter Bibb, who lives for the deal, calls Netflix “affordable” at its current price of about $4 billion. But would it be affordable at a take-out price of $5 billion?
Besides, there is ample reason to believe such a deal makes no sense. It would be an admission that Verizon's FiOS brand needs help, and would give many of those customers the idea that a single broadband pipe is just as good as anything FiOS can offer. Verizon would have to become a brand, a marketer, and there's no indication it knows how to do that. It would also face the same media negotiation problems Netflix faced, and with its deep pockets could not expect to cut a great deal.
AT&T hasn't given up on T-Mobile, by the way. Strategy Analytics is out with a report insisting that, with the Sprint and Clearwire deals on one side and Verizon on the other, and with LTE coming on as a 4G standard, the deal could deliver a competitive three-way market.
The market researcher sees LTE turning mobile into a more Internet-like market, enabling small players to build out national networks cheaply and an Internet business model to develop.
I've said it before and I'll say it again. The only hope for these assets is through an Internet business model in which many companies can bring their equipment to the party and connect through peering arrangements. If the FCC could demand that as part of its sign-off on the deal, we could send the lawyers home and get back to business.
The rest of this M&A game would just be window dressing.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
