T-Mobile USA Merges with MetroPCS

Deutsche Telekom has acquired US operator MetroPCS for a sum of $1.5bn, in order to combine it with T-Mobile USA.

Its an attempt to strengthen T-Mobiles position as a competitor in the US operator market. The combined company will have approximately 42.5m subscribers – increasing its market share from 10 per cent to 13 per cent, and 23 per cent of the prepaid market.

Combined revenues are projected at $24.8bn for 2012. Itll also bring together spectrum from both companies to expand wider network coverage, and deepening its LTE deployment. 

“The T-Mobile and MetroPCS brands are a great strategic fit – both operationally and culturally,” said Deutsche Telekom CEO René Obermann. “The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate, especially around the next-generation LTE network. We are committed to creating a sustainable and financially viable national challenger in the US, and we believe this combination helps us deliver on that commitment.”

As well as the £1.5bn in cash, MetroPCS shareholders will receive 26 per cent ownership in the resulting combined company, with Deutsche Telekom taking the other 74 per cent.

The industry responds

Mike Roberts, principal analyst at Informa Telecoms & Media, thinks the merger is important from both business and infrastructure perspectives.

“T-Mobile USA has made it clear the deal is all about LTE, with the combined spectrum assets of the companies providing a path to 2 x 20MHz for LTE in many markets, double T-Mobile USA’s current plans for 2 x 10MHz for LTE,” says Roberts. “In addition T-Mobile USA says MetroPCS customers will be upgraded from CDMA to a common LTE network as they upgrade their handsets, highlighting plans for a rapid migration from CDMA to LTE.

“The deal could also spark a final wave of consolidation in the US mobile market, which has been in limbo on the M&A front since regulators blocked AT&T’s bid for T-Mobile USA last year. Sprint also reportedly moved to acquire MetroPCS earlier this year but was blocked by its board, and it now appears too late for Sprint to make a counter-offer for MetroPCS. So it may turn its attention to Leap Wireless and/or US Cellular, the next-largest operators in the US after MetroPCS – both have near 6m subscribers compared to MetroPCS with 9m, and like MetroPCS they use the same CDMA technology as Sprint. However these smaller deals could complicate any potential merger between T-Mobile USA and Sprint, which has long been rumoured as it would put the combined group on relatively level footing with AT&T and Verizon Wireless.”

 

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