Deutsche Telekom (DT) and Texas-based MetroPCS Communications have announced that they have signed a definitive agreement to combine T-Mobile USA and MetroPCS under the T-Mobile name. DT’s supervisory board and MetroPCS’ board of directors unanimously approved the transaction, which will be structured as a recapitalisation, in which MetroPCS will declare a one for two reverse stock split, make a cash payment of USD1.5 billion to its shareholders, and acquire all of T-Mobile’s capital stock by issuing to DT 74% of MetroPCS’ common stock on a pro forma basis.
The transaction, which is subject to MetroPCS’ shareholder approval, regulatory approvals and other customary closing conditions, is expected to close in 1H13. Following the completion of the transaction, the combined company is expected to continue trading on the New York Stock Exchange (NYSE). John Legere, currently president and CEO of T-Mobile USA, will serve as president and CEO of the new company and J Braxton Carter, currently chief financial officer and vice chairman of MetroPCS, will be the CFO. The company will operate T-Mobile and MetroPCS as separate customer units, led by Jim Alling, currently chief operating officer (COO) of T-Mobile, and Thomas Keys, currently president and COO of MetroPCS. The enlarged company’s headquarters will be in Bellevue, Washington but it will retain a significant presence in Dallas, Texas, the current base of MetroPCS.
Addressing question marks over the perceived incompatibilities in the two company’s networks – MetroPCS is a CDMA carrier while T-Mobile uses GSM technologies – DT has suggested that by combining T-Mobile and MetroPCS’ complementary spectrum it will be able to provide greater network coverage, deeper Long Term Evolution (LTE) network deployment and a path to offer LTE over at least 20MHzx20MHz spectrum in many metro areas. Further, ‘existing MetroPCS customers will be migrated to a common LTE-based network as they upgrade their handsets’. DT expects to achieve cost synergies and additional upside from revenue synergies of around USD6 billion – USD7 billion.
According to TeleGeography’s GlobalComms Database, the deal will combine the T-Mobile’s – the market’ fourth largest mobile operator by subscribers – 33.168 million customers with sixth player MetroPCS’ 9.292 million customers, although the tie-up will not create a carrier that is bigger than third largest player Sprint Nextel, which counted around 56.386 million customers as at 30 June 2012. Further, according to the Wall Street Journal, a source close to the Federal Communications Commission (FCC) has suggested that the merger should be approved relatively quickly because the combination involves a struggling national player (T-Mobile) and a regional player (MetroPCS), rather than a national carrier (AT&T Mobility) expanding its reach with the acquisition of another dominant player. AT&T’s long-planned USD39 billion takeover over T-Mobile fell foul of the US Department of Justice (DoJ), the FCC and a host of rival mobile operators in December 2011.