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October 03. 2012 7:06PM

T-Mobile, MetroPCS to merge, hope for better reception in competitive cell phone market

LOS ANGELES — T-Mobile USA and MetroPCS Communications Inc. have announced they will merge in a move to combine two weaker wireless companies in an industry dominated by bigger players.

Under the terms of the agreement, MetroPCS shareholders will receive $1.5 billion in cash and 26 percent ownership in the company, which will have the T-Mobile name. Deutsche Telekom AG, the Germany company that owns T-Mobile, will receive a 74 percent stake.

In a teleconference call with media Wednesday, Rene Obermann, chief executive of Deutsche Telekom, said the merger “means we are here to compete, we are here to unlock value and we are here to win. This deal has the potential to be a game changer.”

The merger will establish “the leading value-focused wireless carrier” by combining customer and revenue scale, the companies said in a statement Wednesday. T-Mobile, with 33.2 million mobile customers, is the nation’s fourth-largest cellphone company; MetroPCS is the fifth with 9.3 million customers.

Based on analyst consensus estimates for 2012, the combined company is expected to have roughly 42.5 million subscribers, $24.8 billion of revenue, $6.3 billion of adjusted EBITDA, $4.2 billion of capital expenditures and $2.1 billion of free cash flow in 2012.

“The T-Mobile and MetroPCS brands are a great strategic fit — both operationally and culturally,” Obermann said. “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.”

Still, the combined company will be in the No. 4 position behind Verizon Wireless, AT&T Inc. and Sprint Nextel Corp.

The deal is expected to close in the first half of 2013 and is subject to MetroPCS shareholder approvals, regulatory approvals and other closing conditions.

Los Angeles Times


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