Today the boards of Deutsche Telekom and MetroPCS approved a merger with T-Mobile, but there was an interesting twist to the deal. The deal will be structured as a reverse merger, meaning the smaller MetroPCS “will swallow its larger rival” T-Mobile, but the combined company will keep the T-Mobile brand.
T-Mobile’s parent company Deutsche Telekom will own 74 percent of the combined entity, while MetroPCS will control the other 26 percent. T-Mobile’s new CEO John Legere will run the company.
“We are extremely pleased to announce this transaction with MetroPCS, which enhances Deutsche Telekom’s position in the expanding U.S. wireless market,” said René Obermann, Chief Executive Officer of Deutsche Telekom. “The T-Mobile and MetroPCS brands are a great strategic fit – both operationally and culturally. The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate, especially around the next-generation LTE network. 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.”
If the merger is approved by regulators, the combined entity would boast around 42 million subscribers. That means T-Mobile would still be the 4th largest carrier, but it would inch closer to Sprint who currently has around 56 million subscribers.
Roger D. Linquist, Chairman and Chief Executive Officer of MetroPCS, said, “Through the convergence of both companies to LTE technology, the combined company will provide cutting-edge 4G LTE services and accelerate its roll-out of 4G LTE. In addition, this combination will allow MetroPCS to expand its no-contract offerings into new major metro areas and enhance our combined spectrum portfolio, which provides the potential to offer 4G LTE over at least a full 20×20 MHz in many metro areas. Importantly, MetroPCS and T-Mobile have the same network strategies and LTE networks in the same spectrum bands, which we believe will accelerate the deployment of advanced services to our customers.”
As we said yesterday, we like T-Mobile’s chances of success going forward. The merger with MetroPCS would boost their subscriber base to 42 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.
More details should be coming later today, so we will update our report as the news breaks.