MetroPCS agreed to merge with T-Mobile USA (a subsidiary of Deutsche Telekom) in a deal that creates a much strengthened No.4 mobile operator in the U.S. market with deeper network coverage and the need for an accelerated path to one common LTE network.
Despite operating incompatible legacy networks (CDMA and GSM), the companies said rapid handset turnover (60% – 65% per year) will make for a relatively quick migration of MetroPCS customers to LTE. MetroPCS customers will also benefit from T-Mobile’s much more extensive network.
The basis for the merger will be to re-farm MetroPCS spectrum to create capacity services. Specifically, the spectrum migration plan for the merged company will be:
- GSM will become the merged company’s “universal” technology for roaming, M2M and legacy device
- MetroPCS PCS spectrum will be migrated to HSPA+
- T-Mobile AWS will be repurposed from HSPA+ to LTE over time
- Available MetroPCS AWS spectrum will be migrated to LTE
- AWS will become NewCo’s primary LTE band across Americas
Some other key points of the deal:
- The merged company will use the T-Mobile name and brand. It will be traded on the NYSE.
- The combined company is projected to have 2012 Pro Forma Revenue of $24.8 billion
- The combined company will have 42.5 million subscribers
The annual CAPEX budget for the combined company would be approximately $4.2 billion at current level- Deutsche Telekom will receive a 74% stake
- MetroPCS Shareholders will receive $1.5 billion in cash and 26% ownership in the combined company
- The new company will continue to position itself as “the best value in wireless” in the U.S. market
- The combined company will have ~70,000 total points of distribution, including 50,000 retailers
- The cost synergies are projected $6 – $7 billion over 5 years, including both CAPEX and OPEX on network infrastructure
- The company’s headquarters will be in Bellevue, Washington and it will retain a significant presence in Dallas, Texas.
“The combination with MetroPCS is another logical and significant step that will accelerate our Challenger Strategy and enable us to deliver amazing, affordable and trusted 4G services, while providing opportunities to expand geographic territories and serve more customers. Our enhanced spectrum position will be the foundation for a faster and more reliable network, and will allow us to deploy a deeper and more robust LTE rollout, particularly in major metropolitan areas. We will be a stronger, value-focused competitor, providing customers with offerings such as our Unlimited Nationwide 4G Data and ‘bring your own device’ plans,” stated John Legere, President and Chief Executive Officer of T-Mobile.