Confirmed: T-Mobile and MetroPCS to merge

[ComicalMoodyDan]

T-Mobile and MetroPCS to merge
By David Goldman @CNNMoneyTech October 3, 2012: 10:27 AM ET

NEW YORK (CNNMoney) -- T-Mobile USA and MetroPCS have agreed to merge, joining together two of the nation's largest low-cost wireless carriers.

Both companies have been struggling. Though each remains profitable, their smartphone offerings are lackluster (i.e., no iPhone), they are far behind the curve on network technology, and both are shedding customers.

The combined company, which will be called T-Mobile, will have 42.5 million subscribers -- 33.2 million from T-Mobile and 9.3 million from MetroPCS (PCS, Fortune 500).

It will also have annual sales of nearly $25 billion, an easier path to 4G-LTE network deployments, and estimated cost savings of up to $1.5 billion per year. The companies said that combining their wireless spectrum, customers and finances will help give the new company the scale and resources it needs to succeed in a market increasingly dominated by AT&T (T, Fortune 500) and Verizon (VZ, Fortune 500).

The deal is complex, complicated by T-Mobile's subsidiary status and the two sides' incompatible wireless technologies.

MetroPCS will send $1.5 billion to its shareholders ($4.09 per share) and then perform a 1-for-2 reverse split of its stock -- meaning that the number of outstanding shares would be halved and the value of each share would double. MetroPCS will then buy all of T-Mobile USA's assets by giving T-Mobile parent company Deutche Telekom 74% of its common stock. That means the German telecom giant will remain in control of the combined company, and will provide financial support through debt and credit offerings.

Customers, though, will continue to deal with two distinct brands operating separately -- at least for now. The two carriers have different network technologies, which means that MetroPCS' phones are incompatible with T-Mobile's network, and vice versa.

That could change eventually, since the new company plans to deploy a 4G-LTE network that will work across both customer bases. Upgrading all customers to that network and discontinue the legacy technologies will be a gradual, multi-year process.

New T-Mobile CEO John Legere will remain at the helm of the new carrier, and MetroPCS' Chief Financial Officer Braxton Carter will stay on as CFO. The companies did not announce plans for MetroPCS CEO Roger Linquist.

The new company will be have its headquarters in T-Mobile's hometown -- Bellevue, Wash. -- with a presence in Dallas, where MetroPCS is based.

Both companies' boards have approved the deal, which they expect to close in the first half of 2013, assuming regulators allow it to go through.

"The T-Mobile and MetroPCS brands are a great strategic fit," René Obermann, CEO of Deutsche Telekom, said in a prepared statement. "We are committed to creating a sustainable and financially viable national challenger in the U.S., and we believe this combination helps us deliver on that commitment."

The merger is between the nation's fourth- and sixth-largest wireless carriers by revenue, but T-Mobile will not move any farther ahead in the list of largest U.S. cell phone companies. The combined company will still be smaller than third-place Sprint (S, Fortune 500) both in terms of sales and number of subscribers.

T-Mobile and MetroPCS to merge - Oct. 3, 2012

[TelcomJunkie]

Ah it's 2006 and the Sprint/Nextel merger all over again!

[Yugopro]

Ah it's 2006 and the Sprint/Nextel merger all over again!

No, it is not.

[ComicalMoodyDan]

I agree this merger isn't nearly as complicated as the Sprint/Nextel one as well as the mess they got into with Clearwire later on. The T-Mobile/Metro PCS merger faces some challenges but nothing like Sprint has got themselves in a mess with and they are just now starting to recover from.

[Maximum Signal]

Is MetroPCS using CDMA or GSM technology?

[Blue4Life]

Wirelessly posted (Opera/9.80 (S60; SymbOS; Opera Mobi/SYB-1111151949; U; en-US) Presto/2.9.201 Version/11.50)

MetroPCS currently uses CDMA & LTE. CDMA would eventually be phased out in 2015.

[ComicalMoodyDan]

At least they don't have to deal with CDMA/WiMax/LTE/iDen (Sprint/Nextel) and all the fighting with their "partner" Clearwire that is in a mess. I really don't think T-Mobile and Metro PCS will be anywhere as complicated as what Sprint has taken on.

[spleck]

Ah it's 2006 and the Sprint/Nextel merger all over again!

A T-Mobile and MetroPCS merger has NO hint of SMR rebanding or QChat fiascos.

[TelcomJunkie]

A T-Mobile and MetroPCS merger has NO hint of SMR rebanding or QChat fiascos.

The SMR rebanding was fairly painless on Nextel's part and was going on long before the Sprint merger happened. The QChat was a whole 'nother boondoggle that mostly stemmed from Sprint being cheap when developing the technology. You also really can't drag Clearwire into this as again, that was separate from the Sprint/Nextel merger. It was a poor decision on Sprint's part, but it wasn't part of the merger.


Merging a CDMA and a GSM carrier now-a-days isn't a cheap endeavor like it was back in 1997. Most users have smartphones that will have to be replaced with whatever technology the end up choosing and to migrate those users will be expensive and how they approach handling those people will determine how successful this merger is. The customer will want a upgrade and I'm doubtful that the carrier will be wanting to toss that out there. Add in the network upgrade and everything that is required to upgrade the vast Metro PCS DAS network and you've got a pretty expensive conversion. So again, this whole thing COULD go smooth or it can go the way of the Sprint/Nextel merger. It only costs money.

[spleck]

The SMR rebanding was fairly painless on Nextel's part and was going on long before the Sprint merger happened.

It's STILL going on though...

The QChat was a whole 'nother boondoggle that mostly stemmed from Sprint being cheap when developing the technology.

QChat is a Qualcomm product. On paper, Qualcomm sold it as a superior product to iDEN PTT, but in practice it was not, and despite attempts on Sprint's part, they couldn't get good performance out of it. Sprint took the blame, but most of the fault lies with Qualcomm.

Merging a CDMA and a GSM carrier now-a-days isn't a cheap endeavor like it was back in 1997. Most users have smartphones that will have to be replaced with whatever technology the end up choosing and to migrate those users will be expensive and how they approach handling those people will determine how successful this merger is.

I'm pretty sure handset turnover is higher now than it was in 1997. In fact, MetroPCS quotes a natural turnover of 60-65% per year.

[Quint101]

Verizon and AT&T had to deal with merging users of different technologies and it was mostly seamless. AT&T merged its Alltel users into its network... They gave users new, "comparable" devices and rebanded the CDMA network into a HSPA/3G network. The only caveat I've seen is that users must have a 3G (at minimum) phone in the former Alltel areas. Verizon bought and retained some of those Unicel customers. Verizon overlaid the RCC properties that it was keeping with CDMA/EVDO... GSM was kept up for roaming (not sure whether it is still there now).

The only major differences between the aformentioned mergers and T-Mobile/MetroPCS is the number of subscribers... millions for TMo/MPCS vs the hundreds of thousands in the other mergers.