T-Mobile is gearing up to become a real challenger to the larger wireless carriers in the US. They just announced a new CEO, sold some tower rights to raise $2.4 billion, and now Bloomberg is reporting their parent company Deutsche Telekom is making a move to acquire MetroPCS. The transaction is not official yet, but people with knowledge of the matter say it could be announced as soon as tomorrow.
A separate report from AllThingsD says T-Mobile is “holding talks” with MetroPCS but there are “significant issues” yet to be worked out.
MetroPCS is the 5th largest wireless service provider in the US with 9.3 million subscribers, and it has been a takeover target for the last couple of years. Early this year Sprint was only hours away from acquiring MetroPCS, but their board rejected the deal at the last minute.
If T-Mobile and MetroPCS were to merge, they would still fall behind Sprint in terms of total subscribers. Sprint is the 3rd largest wireless carrier with 56 million subscribers, while T-Mobile currently has 33.2 million.
Some will point out that MetroPCS currently operates a CDMA/LTE network and T-Mobile is a GSM carrier. We don’t know how the two networks would be combined, but T-Mobile is already spending $4 billion to refarm their current wireless spectrum in an effort to launch 4G LTE service next year.
T-Mobile has lost 2.76 million contract customers since the failed takeover by AT&T, but we like their chances of success going forward. The merger with MetroPCS would boost their subscriber base to 42.5 million and I believe they could overtake Sprint within the next two years.
Post-paid subscriber growth is basically flat in the US, and all the big subscriber gains are now coming from pre-paid customers. T-Mobile already offers a robust selection of pre-paid plans, they are upgrading their network to support more unlocked phones, and they are partnering with a bunch of MVNOs to attract more subscribers.
What do you think of the proposed transaction? Should T-Mobile merge with MetroPCS?