Deutsche Telekom's T-Mobile USA and MetroPCS Communications have signed an agreement to merge in a deal that will see MetroPCS shareholders receive US$1.5 billion in cash and 26 percent of the new company.
The combined company will retain the T-Mobile name, but plans to use both brands. It will be able to compete better with the other national U.S. wireless carriers thanks to expanded scale, more spectrum and financial resources, the two operators said in a statement.
Deutsche Telekom's supervisory board and MetroPCS's board of directors unanimously approved the transaction.
The combined company will offer subscribers more choices, including an expanded selection of affordable contract, no-contract monthly, SIM-only, pay-as-you-go and mobile broadband plans, John Legere, president and CEO at T-Mobile said in a blog post.
The deal comes after a plan to merge T-Mobile with AT&T was canceled last year because regulators rejected the plan as anti-competitive. But the failed merger also gave T-Mobile $3 billion in cash and more spectrum.
T-Mobile, the fourth-largest U.S. mobile operator, has been struggling to keep up with the competition, and continues to lag behind its larger rivals in subscriber numbers and deployment of a next-generation LTE network.
But with the acquisition of MetroPCS, T-Mobile is hoping turn the tide after reporting a decline of 205,000 subscribers in the second quarter. This isn't a deal to survive, it's to thrive, according to Legere, who will retain his CEO title in the new company.
For example, in many areas pooled spectrum resources will result in the availability of 20MHz of spectrum for both downloads and uploads, the amount needed for the existing version of LTE to perform at its best.
T-Mobile, unlike its larger competitors Verizon Wireless and AT&T, doesn't currently offer commercial LTE services, but is still testing its network ahead of a planned 2013 launch.
MetroPCS and T-Mobile have the same LTE network strategies and spectrum in the same bands, which will help accelerate the roll-out of a network based on the technology, the companies said in a joint statement.
Increasing scale will allow the combined company to secure more compelling handsets, content and applications, they said.
Unlike the AT&T merger proposal, a merger with MetroPCS would strengthen two operators that have both struggled against the dominant carriers, analysts told IDG News Service on Tuesday. If anything, the deal will improve the competitive landscape, according to Phil Marshall of Tolaga Research.
The transaction is subject to MetroPCS shareholder approval, regulatory approvals and other customary closing conditions, and is expected to close in the first half of 2013 if all goes well.
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