Deutsche Telecom to Partially Acquire, Merge MetroPCS w/ T-Mobile USA
October 3, 2012 11:45 AM
comment(s) - last by
(Source: T-Mobile USA)
Merger will create a strong fourth player in the U.S. market
When AT&T’s (
of Deutsche Telekom AG (
) subsidiary T-Mobile USA was
shot down by U.S. regulators on antitrust grounds
, many feared regulators may have wasted their effort as T-Mobile USA was on the verge of financial failure. Indeed,
seemed to confirm the worst.
I. Merger Strengthens T-Mobile USA
But in a surprising, MetroPCS Communications Inc. (
) and T-Mobile USA
today that they would be merging into a single value carrier. The deal is slightly complicated financially, but the big picture is that T-Mobile USA will remain independent, although MetroPCS and T-Mobile may be able to enjoy some joint marketing pitches.
The move can be viewed as a partial acquisition of MetroPCS by Deutsche Telecom, which will then be merged it into its struggling U.S. unit T-Mobile.
The financial side of the deal involves MetroPCS splitting its stock (doubling the number of shares), then paying $1.5B USD in direct cash to Deutsche Telecom shareholders, and handing over 74 percent of its stock to Deutsche Telecom shareholders. The combined company (T-Mobile USA + MetroPCS) will have $15B USD in combined unsecured debt notes, and Deutsche Telecom will "provide a $5.5 billion backstop commitment for certain MetroPCS third-party financing transactions."
The deal creates a new carrier with a projected 42.5m subscribers, $24.8B in revenue, $6.3B of adjusted EBITDA (non-GAAP earnings), $4.2B in capital expenditures, and $2.1B of free cash flow (defined as EBITDA less capital expenditures) in 2012.
II. A Different Deal
It is a substantially different route compared to the AT&T deal, which involved a $39B USD cash/stock payment to Deutsche Telecom. That deal would have merged T-Mobile's roughly 30 million customers with AT&T's roughly 100 million customers to produce a mega carrier with 130+ million customers.
MetroPCS was long eyeing a tie-up with T-Mobile USA, and had looked to potentially
purchase certain assets/subscriber contracts from the carrier
had the AT&T deal been approved.
The new merger makes T-Mobile USA bear a closer resemblance to Sprint Nextel Corp. (
) which has roughly 52 million subscribers (as of Q2) and also has contract-free offerings under the Boost Mobile and Virgin Mobile brands.
The merger also puts pressure on AT&T and Verizon Wireless (a joint venture between Verizon Communications Inc. (
) and Vodafone Group Plc. (
)). It also brings the promise of revived financials to T-Mobile USA. Versus T-Mobile who has long bled money, MetroPCS has a culture of success, posting an impressive $148M USD profit last quarter.
T-Mobile has been
stepping up its HSPA+ efforts
, but this "3.5G" tech has struggled to compete against the bleeding edge at AT&T and Verizon Wireless -- both of whom have deployed "4G" LTE. That said, it offers some of the best
value plans in the industry
Some details of the deal -- for example how the executive leadership will shake down -- remain unknown, and of course the purchase has to pass regulatory scrutiny. T-Mobile USA
recently named John Legere,
a three-decade telecom industry veteran, as its new CEO, replacing
CEO-of-two-years Phillip Humm
who left to become
CEO of Verizon Wireless parent Vodafone Europe
Assuming it gets approved, though, the net result of this merger is simple -- more competition in the mobile market.
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RE: Service Options
10/3/2012 3:28:50 PM
I have been dealing always with a phone CSR/online CSR till now and never gone to a T-Mobile store. I purchased my phones online from t-mobile.com midnight sale, applied my corporate discount, waived my activation as well as even unlocked my phones via call/chat. I may be an exception but till now, I basically was able to get done sans any visit to a TMo retail location.
I always first try to chat as I found
a) It to be the fastest.
b) Once I enter particulars and click
button within 1 min somebody is available.
c) It might longer time and more effort but at the end there is a
option which will record the conversation to ur email/u can cut and paste and store locally.
d) Thus there is a record of what was discussed/agreed upon rather than "he said-she said". Very useful for billing related issues where there might be umpteen follow-ups
BTW my home TV & Internet account is under my wife's name and I have done the same with Comcast (via on-line chat 95%) and in rare cases over the phone with my wife initiating and transferring to me to continue the conversation.
"We are going to continue to work with them to make sure they understand the reality of the Internet. A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis
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