T-Mobile and MetroPCS on Wednesday formally announced their intent to merge to form a new mobile carrier called T-Mobile. You can count on this one getting approved, despite the technology hurdles, but where does it leave Sprint?

Chris Spera, Contributor

October 4, 2012

2 Min Read

T-Mobile USA on Wednesday formally announced it will buy MetroPCS, said Reuters.

So, what's a wireless carrier with 42.5 million subscribers to do? Well, a lot, actually.

As far as the business end of it goes, it's officially a reverse merger, with smaller, public, MetroPCS buying the privately owned T-Mobile USA. The deal, expected to close in the first half of 2013, will require regulatory as well as shareholder approval. The newly formed company will retain the T-Mobile name. Deutsche Telekom will take a 74% stake in the combined company, and MetroPCS will declare a one for two reverse stock split, and return $1.5 billion to its shareholders. T-Mobile's CEO Jon Legere will head up the organization. MetroPCS' CFO Braxton Carter will be CFO of the new, combined company.

News of the merger has caused a small yo-yo effect with MetroPCS' stock--shares rose 18% on Tuesday on reports of the pending merger, and fell 9.8% on Wednesday as realization of the technology challenges sank in.

Financially, the organization will face challenges, but Wall Street seems to like the idea so far. The numbers as reported by Reuters don't seem to be giving anyone a serious case of heartburn.

The challenges will come on the technology side, as the new T-Mo moves to shut down the MetroPCS network by 2015, post regulatory and shareholder approvals. Legere said the organization would even provide customers with financial incentives to make the technology move, if necessary.

You can count on this one getting approved, despite the tech hurdles. With Wall Street backing an increased subscriber base-bump of just over 9 million subscribers, spectrum, and a way for majority owner Deutsche Telekom to exit if necessary, a stronger, more-competitive fourth largest wireless option now exists in America. MetroPCS customers are mostly pre-paid.

With T-Mo wanting to get into that market and its willingness to provide incentives--read free or cheap, off-cycle phone upgrades--to existing MetroPCS customers, vacating the existing spectrum to make way for a larger LTE network will go relatively smoothly. Given the $2.4 billion T-Mo just got by dumping its cell towers, the spectrum from the failed AT&T merger as well as the LTE network and additional spectrum from the MetroPCS deal, the deal and pending network has legs.

Now: What do you think Sprint is going to do? Leave a comment below.

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About the Author(s)

Chris Spera

Contributor

Based in Chicago, Chris is a senior IT consultant. He serves BYTE as a Contributing Editor. Follow Chris on Twitter at @chrisspera and email him at [email protected].

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