Deutsche Telekom penned a deal Wednesday to merge its T-Mobile USA unit with rival U.S. carrier MetroPCS, in a bid to grow T-Mobile's subscriber base and position it as a more serious competitor to industry leaders Verizon and AT&T.
Deutsche Telekom announced the merger just one day after it confirmed it was holding talks with MetroPCS to discuss the details of the deal. The German telecommunications company will hold a 74 percent stake in the combined entity, while MetroPCS will hold 26 percent and pay out $1.5 billion to its shareholders.
The merger comes less than one year after AT&T's proposed $3.9 billion buyout of T-Mobile was shot down by the Federal Communications Commission, which claimed the deal would stifle fair competition in the carrier market.
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The combined T-Mobile-MetroPCS entity will be able to fight back more aggressively against rival U.S. carriers, Deutsche Telekom said. Verizon and AT&T dominate the U.S. market, with their growth being fueled in part by their support for Apple's iPhone, a smartphone T-Mobile and MetroPCS don't yet offer on their networks.
According to Deutsche Telekom, the merged company will hold a subscriber base of approximately 42.5 million users and is expected to see roughly $2.8 billion in revenue this year. Verizon, by comparison, reported a subscriber base of 94.2 million users when it announced its second-quarter earnings results in July.
Joining forces with MetroPCS also will help facilitate T-Mobile's adoption of the latest 4G long-term evolution (LTE) wireless network, a milestone already achieved by Verizon, AT&T and Sprint. T-Mobile was slated to roll out 4G support next year, as part of a broader initiative it has dubbed its "Challenger Strategy." But through its alliance with MetroPCS, which was one of the first U.S. carriers out of the gate with support for 4G LTE networks, this time line could be accelerated.
"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," said John Legere, president and CEO of T-Mobile, in a statement. "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."
Upon the closing of the deal, which is expected to take place during the first half of 2013 pending regulatory approvals, T-Mobile's Legere will serve as CEO and president of the combined company, while J. Braxton Carter, the current CFO and vice chairman of MetroPCS, will act as CFO.
The company will carry the T-Mobile name, but Deutsche Telekom said T-Mobile and MetroPCS will continue to operate as separate customer units, led by Jim Alling, the current COO of T-Mobile, and Thomas Keys, current president and COO of MetroPCS, respectively.
The company's headquarters will be in Bellevue, Wash., but it will retain "a significant presence" in Dallas, according to Deutsche Telekom.
PUBLISHED OCT. 3, 2012
