So the boards of Deutsche Telekom and MetroPCS Communications Inc. (NYSE: PCS) have approved a deal for a merger of the latter with the former’s U.S. subsidiary, T-Mobile USA. The deal will give the fourth-largest U.S. wireless carrier more scale in its efforts to compete with the industry leaders.
The combined company will be called T-Mobile and will be run by T-Mobile’s Chief Executive John Legere. It will be structured as a reverse merger, which will give T-Mobile a publicly traded stock that Deutsche Telekom could sell down over time to reduce its ownership of its U.S. subsidiary.
René Obermann, chief executive officer of Deutsche Telekom, said:
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.
The deal is more likely to be well received by regulators than last year’s $39 billion deal for T-Mobile to be acquired by AT&T Inc. (NYSE: T). That would have reduced the ranks of national carriers from four to three. But the new deal also puts pressure on number three wireless carrier, Sprint Nextel Corp. (NYSE: S), which previously had explored mergers with both MetroPCS and T-Mobile.
MetroPCS shares are down almost 8% to $12.51 in morning trading. The 52-week range is $5.53 to $14.51.