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June 04, 2015

Is a Dish and T-Mobile merger in the works?

Dish Network Corp and T-Mobile US Inc are discussing a deal to combine the second-largest satellite TV operator in the United States with the fourth-largest wireless carrier, a person familiar with the matter said on Thursday.

Dish and T-Mobile US shares were up 5.6 percent and 4.8 percent respectively in morning trading on Thursday, while those of T-Mobile's majority owner Deutsche Telekom were up 2.9 percent.

A deal, which has been mooted in the past with senior executives from both companies having entertained it in public comments, would fit with Deutsche Telekom's stated interest in partnerships to strengthen its U.S. business after failing to sell it last year. It would also join a wave of tie-ups in the telecoms and TV industries as companies look to add services for customers.

The talks between the two companies are at an early stage and important aspects of the deal such as a price and structure have yet to be determined, the source said, asking not to be identified because the negotiations are confidential.

Representatives at Dish and T-Mobile US did not immediately respond to emails seeking comment. A spokesman for Deutsche Telekom , which owns about 66 percent of T-Mobile US, declined to comment.

The two sides have agreed T-Mobile Chief Executive John Legere would serve as the CEO and Dish CEO Charlie Ergen would become the combined company's chairman, the Wall Street Journal, which first reported on the news, cited people familiar with the matter as saying.

T-Mobile has a market capitalization of about $31 billion, while Dish's is around $33 billion.

"It is clear that Deutsche Telekom is looking for future prospects in the United States," a source close to Deutsche Telekom's management board told Reuters, adding it had no knowledge of talks between T-Mobile US and Dish.

Dish and T-Mobile US have previously floated the possibility of a deal. Ergen said earlier this year he was "impressed" by T-Mobile US, while Legere said it made sense for T-Mobile US to team up with Dish.

Dish, a surprise winner in the record-setting U.S. sale of airwaves for mobile data in January, has amassed wireless spectrum and recently went into streaming TV to offset the loss of pay-TV subscribers. However, what Dish plans to do with the newly-acquired spectrum remains unclear.

T-Mobile US has been looking to buy spectrum from smaller rivals, according to media reports.

The company has turned around years of subscriber losses with cut-price deals, marketing and wireless plans in recent quarters. While these initiatives have led to customer gains, they have pressured T-Mobile US's margins.

Last year, Deutsche Telekom tried to sell T-Mobile to Sprint Corp but the No.3 U.S. carrier dropped its bid after regulatory resistance. French operator Iliad SA also abandoned its attempt to buy T-Mobile US last October.

T-Mobile US's rival AT&T Inc is close to wrapping up its $49 billion deal for Dish competitor DirecTV , while Charter Communications Inc is seeking to remake the U.S. cable television industry by acquiring larger rival Time Warner Cable Inc for $56 billion.

(Reporting by Greg Roumeliotis in New York, Supriya Kurane in Bengaluru and Peter Maushagen and Christoph Steitz in Frankfurt; Editing by Mark Potter and Tom Brown)