Proposed merger of T-Mobile USA and MetroPCS

On October 3, 2012, MetroPCS reached an agreement to merge with T-Mobile USA, subject to regulatory and shareholder approval. MetroPCS shareholders are expected to hold a 26% stake in the merged company, which will retain the T-Mobile brand. While the merged company will still be the fourth largest carrier in the United States, acquiring MetroPCS will give T-Mobile access to more spectrum and financial resources to maintain competitiveness and expand its LTE network.
Announcement
According to Reuters both Deutsche Telekom and MetroPCS have said that they will merge both of their U.S mobile operations to create a larger forth-place mobile player that will be able to compete with its rivals. The board of both Deutsche Telekom and MetroPCS voted on Wednesday to approve the deal that will give Deutsche Telekom 74 percent and MetroPCS 26 percent in the new combined entity. This merger will mark a long awaited consolidation in the U.S. mobile maker, in which the fourth-largest mobile carrier which is Deutsche Telekom's T-Mobile Mobile aims to get the scale it needs to compete with AT&T and Verizon which are bigger mobile carriers. Last year, U.S. regulators prevented a planned $39 billion tie-up between AT&T as well as T-Mobile on the grounds that the merger would lead to higher prices for consumers and also would hurt competition. The difference between this merger and the AT&T merger is that this deal is effectively a reverse merger in that MetroPCS the smallest of the two companies would be buying T-Mobile USA. The companies have said that the deal would be classified as "structured as a recapitalization" in that MetroPCS would declare a 1 for 2 reverse stock split and would pay $1.5 billion in cash to its shareholders. Afterward the merger the new company would still remain listed on the New York Stock Exchange, which analysts said would benefit Deutsche Telekom from higher stock market valuations in the U.S. via what is effectively a spin-off of T-Mobile USA. The deal would also help Deutsche Telekom lessen the burden of having to invest in the U.S by making its local unit more independent, and give the former monopoly a liquid asset that it could sell down the road if it wanted to exit the U.S. eventually. U.S. regulators must still approve the deal, and the companies said closing was expected in the first half of 2013. The combined company will be called T-Mobile and led by current boss John Legere and will have 42.5 million subscribers and pro forma revenues in 2012 of $24.8 billion.
T-Mobile President and CEO John Legere posted a video on T-Mobile’s YouTube page where he details some of the finer points about the merger and on TmoNews.com a T-Mobile news site show and full text internal e-mail to T-Mobile employees.
Stocks Drop
After the details of the transaction were announced MetroPCS' shares tumbled 9.8 percent to $12.24 today after jumping 18 percent yesterday after Bloomburg first reported that a both of the companies were close to a deal. Deutsche Telekom's shares rose to less then 1 percent to 9.75 euros or 12.57 US Dollars today.According to Sanford C. Bernstein & Co. in New York analyst Craig Moffett it’s difficult to value a deal when one of the sides is privately held. Having a optimistic view you would value MetroPCS shares at about $18 in the transaction. That would imply that MetroPCS would have a market value of $6.5 billion. BTIG LLC in New York analyst Walt Piecyk says that the merger values MetroPCS at $15 to $16 and that is assuming that the companies are able to deliver on their promises of synergies.

Main Menu

See Also

Main Menu