T-Mobile, MetroPCS merge in $1.5B deal
updated 11:26 am EDT, Wed October 3, 2012
Deutsche Telekom to buy 74 percent of combined company
Following earlier reports that the two wireless carriers were in talks concerning a possible merger, the union of T-Mobile and MetroPCS has been confirmed today. T-Mobile announced today that it would be combining with MetroPCS in a deal structured as a recapitalization. The combination of the fourth- and fifth-largest carriers will result in a carrier that still trails the top three, though T-Mobile spokespersons believe the deal will make the combined entity more capable of aggressive competition in the wireless market.
The deal was unanimously approved by Deutsche Telekom's supervisory board as well as the board of directors of MetroPCS. Structured as a recapitalization, the deal will see MetroPCS declaring a 1-for-2 reverse stock split and making a cash payment of $1.5 billion to its shareholders. MetroPCS' shareholders will also receive a 26 percent ownership stake in the new combined company.
MetroPCS will then acquire all of T-Mobile's capital stock by issuing to Deutsche Telekom 74 percent of MetroPCS' common stock on a pro forma basis. Deutsche Telekom will receive a 74 percent stake in the new company.
The combined company is projected to have a pro forma revenue of $24.8 billion for 2012. The combined subscriber base of both companies is 42.5 million.
The announcement also detailed in part how T-Mobile plans to deal with the different wireless technologies underlying the two carriers. Existing MetroPCS customers will be migrated to a common LTE-based network when they upgrade their handsets. T-Mobile apparently plans to use MetroPCS' existing spectrum allotments to supplement its own as the carrier seeks to grow out its own LTE network.
The transaction is still subject to MetroPCS shareholder approval, regulatory approvals, and other customary closing conditions. It is expected, though, that the transaction will close in the first half of 2013.
