T-Mobile, MetroPCS to merge in $1.5bn deal

T-Mobile, MetroPCS to merge in $1.5bn deal

Summary: Adrift after a failed AT&T acquisition, the beleaguered No. 4 U.S. wireless carrier finds stability in a merger with fifth-ranked MetroPCS.

TOPICS: Telcos

T-Mobile USA and MetroPCS will merge in a multi-million-dollar deal to create "the leading value carrier in the U.S. wireless marketplace," both companies announced this morning.

The deal is structured as a recapitalization, in which MetroPCS will declare a 1 for 2 reverse stock split, make a cash payment of $1.5 billion to its shareholders and acquire all of T-Mobile's capital stock by issuing to Deutsche Telekom, its parent company, 74 percent of MetroPCS' common stock. (An additional wrinkle: the new company will have about $15 billion in debt.)

In other words, 26 percent of the new company will be owned by MetroPCS shareholders and 74 percent will be owned by Deutsche Telekom -- a rebuff to rumors that the German company was trying to exit the U.S. market.

The new company will keep the T-Mobile name, locate its headquarters in Bellevue, Wash. (with a sizeable presence in Dallas, Texas) and continue trading on the New York Stock Exchange. T-Mobile president and CEO John Legere will keep his title for the new combined company, which plans to operate the two brands as separate customer units led by T-Mobile's Jim Alling and MetroPCS' Thomas Keys, respectively.

The companies believe the merger will offer more network coverage, a broader product lineup and "a clear-cut technology path to one common LTE network," and serves as a hedge against the increasing consolidation at the top of the U.S. market, where rival carriers Verizon and AT&T lead the market by a considerable margin.

The announcement comes just a year after AT&T made a failed bid to acquire T-Mobile.

T-Mobile has long targeted the low end of the wireless market, regularly undercutting the prices of its wireless rivals and aggressively pushing out new smartphones in a bid to woo customers to the pink side.

Without Apple's iPhone or Verizon's well-marketed "Droid" lineup, however, the company has failed to slow an exodus of customers in a market where, paradoxically, they choose to spend more on their mobile devices.

The combined company will continue to bet on no-contract services; now, it merely has more customers for them under the same corporate roof. (The new company is expected to have approximately 42.5 million subscribers and $24.8 billion of revenue.) The deal will help intensify T-Mobile's battle with Sprint over the more price-sensitive side of the wireless market.

"Ultimately, this combination will create a stronger wireless provider nationally with broader value offerings to better serve our combined customers and drive shareholder value," MetroPCS chairman and CEO Roger Linquist said.

The deal is expected to close in the first half of 2013.

Topic: Telcos

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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  • get your facts straight

    t-mobile obviously offers a droid lineup as the Samsung Galaxy S3 is their flagship phone.
    • Read more critically, please

      That's "Droid," as in the brand name licensed from Lucasfilm for Verizon's collection of Android devices, not "droid," as in shorthand for Google Android. (Thus the description "well-marketed" -- an easily identifiable, memorable brand for consumers.)
      • Why is this so confusing for people?

        Thank you for clearing that up, Andrew. I hate Verizon for pushing the "Droid" name on consumers. As evidenced by Pokerstariceman above, most people think that all Android devices are "Droids." It's infuriating. Google made a mobile operating system called Android. Devices that run Android are not necessarily "Droid" branded devices. It's really not that difficult.
        • It IS confusing for the average consumer

          Android..Driod. One's a phone but which one? All have a sci-fi robot connotation. Poor branding all the way around unless you are a geek. And don't even get me started over OS branding like Jelly Bean, Ice Cream cone and Peanut Butter and Jelly sandwich.
          • Gee, I'm flattered to know I'm not "average"

            I am a 65-year-old woman with a Samsung Galaxy S2 and most of my friends/co-workers have Android phones; yet I have never EVER heard someone refer to their Android phone as a Droid with the exception of my son when he had a Droid Bionic. Who calls Android phones Droids? Practice saying the word: ANdroid, ANdroid, ANdroid. It's not the least bit confusing IMO, it's that people don't pay attention.
          • Gee you're Super Average.

            First off, stop trying to toot your own horn by stating how old you are. I know plenty of idiots your age, cell phone not included. I'm sure millions of parents/grandparents are contstantly having to be shown how to work a new era cellphone. I'm almost certain if you had your parents/grandparents in your childhood, you've helped them learn up to date things. Stop sitting on all your degrees/knowledge and join the real world. The outdated people who don't know about jellybean, ice cream sandwich, and peanut butter are the people who can actually afford to pay their cellphone(s) bill. You and your comments don't impress me, and the rest of your outfit, grow up.
  • Good news for consumers

    This should be good news for consumers. Better to have four strong players in the mobile market. Now if they can only get Catherine Zeta Jones back in their ads. The new gal is a hottie, but Zeta Jones takes the term "smokin'" to previously unfathomable heights. Until Zeta Jones came along, most scientists simply did not believe an exemplar of the species Homo Sapiens Sapiens could be that mind-blowingly stunning. Jones forced them to throw out all their previous models of human hotness and frantically piece together new ones to explain their new observations. It would be no exaggeration to say the catherine Zeta Jones phenomenon forced a paradigm shift in the science of ladyhotness, and anyone who can succefully explain her will most likely take home a Nobel prize in the field.
    • CZJ & tmo was a.great combo.

      Im lmao right now at dsfeg b/c I feel the exact same way...Jones is the reason I even considered tmo after watching her sexy self in those commercials...that promted me to check out tmo, and been a customer ever since....yes, bring her back!.lol
      Dan Hendon
    • CZJ was great in TMob ads

      TMob ads with CZJ were exceptional. Now ads are just OK. CZJ replacement is OK, nice girl and all but she is not CZJ.
      In any case TMob ads are still better than ads of any other mobile provider. Most of ads are just a bunch of letters and numbers. I think that the are targeted at modems not people.
  • What about the 9 call centers they closed

    Funny no one seems to mention the 9 AMERICAN call centers TMo closed and the 3 ones in the philipines and india they opened.
    • ...

      Cause no one cares obviously.
  • Spurned by AT&T?

    Revisionist history?
    • I know...

      I know.. AT&T wanted them, it was the government that stopped it.
      • Close..

        It was the people telling the government how bad the merger would be that got the government to stop the merger.

        This merger makes a lot of sense, both companies seem to have a strong sense of customer service, both have cell towers that are compatible and both like to offer plans at very reasonable prices.

        I also like the idea that they want to run them as two separate companies, which leaves choice, but allows them to combine coverage and other resources where it makes sense to do so.
      • Hey now, be nice

        444 words on a breaking news story and I choose one incorrectly? Easy, now!

        You're right, though -- it's not quite right. I've corrected it.