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What T-Mobile, MetroPCS Merger Means For Business

Proposed merger of T-Mobile USA and MetroPCS will have far-reaching implications once the deal is complete. Here's what you can expect.

T-Mobile USA's parent company, Deutsche Telekom, is desperate to rid itself of the fourth-largest wireless network operator in the country. T-Mobile USA has underperformed against its larger rivals for years now (partly because it doesn't have the iPhone) and Deutsche Telekom would rather focus its resources on other projects.

This week's announcement from Deutsche Telekom, that it wants to merge T-Mobile USA with MetroPCS, marks the second time it has attempted to dump T-Mobile USA on a competing U.S. carrier.

In 2011, Deutsche Telekom tried to pawn T-Mobile USA on AT&T. That attempt was squashed by the Federal Communications Commission and the U.S. Department of Justice. The proposed acquisition would have created a mega carrier with tens of millions more customers than its closest rival.

[ While you're waiting for the merger to take place, see what the carriers are doing to protect LTE from lawsuits. Read Carriers Team Up To Protect LTE Patents. ]

Deutsche Telekom's newest proposal stands a better chance of gaining regulatory approval. Combined, "T-Metro" would have 42.5 million customers, still well below Sprint's 55 million. Sprint is the third-largest carrier. Verizon is the largest, and AT&T the second-largest.

Since the transaction is likely to be approved, it will impact the entire wireless industry--though not to the same degree the T-Mobile/AT&T deal would have. If your business uses T-Mobile or MetroPCS services, here are a few things you should prepare for.

More LTE 4G -- T-Mobile offers post-paid and pre-paid services using GSM and HSPA+ technology. It plans to add LTE to that mix starting next year. Once it acquires MetroPCS, it will have more spectrum for its LTE network (something MetroPCS is already deploying aggressively). The combined AWS 1700MHz spectrum holdings of T-Metro means its customers will have access to LTE 4G in more places once the network is fully deployed.

More 3G and Faux 4G -- In order to merge the 3G and 4G networks, T-Mobile and MetroPCS have some complicated wireless shenanigans in store. MetroPCS's slow and creaky CDMA 1X (2.5G) network will eventually go away. Once it does, that spectrum (1900MHz) will be used to supplement T-Mobile's HSPA+ 4G network. Adding MetroPCS's 1900MHz spectrum to its own will provide better 3G/4G coverage for T-Metro customers where LTE isn't available.

Replacement Phones -- MetroPCS uses CDMA technology for its 2.5G network. They are incompatible with T-Mobile's GSM-based network. T-Mobile expects to shut down MetroPCS's CDMA network by 2015. That means current MetroPCS customers will need to replace their phones. T-Mobile doesn't think this is a problem, though, given the time frame involved and its customers' propensity to buy new phones more often. Either way, MetroPCS customers will eventually be buying new devices.

Greater Plan Flexibility -- One of the benefits brought to the table by MetroPCS is its pre-paid plans. MetroPCS customers purchase their phones outright and don't sign two-year contracts. It also offers wireless services for a lower price than its post-paid rivals. There's no way T-Mobile will squander this advantage. In fact, many of the press materials surrounding the merger announcement touted the companies' ability to be a "value challenger" to the larger carriers. There will be more options, there's no doubt.

Potential Higher Costs -- T-Mobile's service offerings cost more, on average, than MetroPCS's do for comparable voice, messaging, and data on a monthly basis. While T-Mobile USA's prices won't likely jump too much, customers who stick with the MetroPCS pre-paid service as it is folded into T-Mobile may see their service prices go up.

Perhaps the best news about all these changes is that they aren't happening any time soon. Deutsche Telekom doesn't expect the deal to close until the middle of 2013. Even when it does, none of these network, device, and plan shifts will occur overnight. In fact, it will take years to play out.

So if you're a customer of either T-Mobile USA or MetroPCS, don't sweat it right now. There's plenty of time to evaluate the merger's benefits for you and your business as it unfolds over the next six months.

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User Rank: Ninja
10/5/2012 | 1:14:57 PM
re: What T-Mobile, MetroPCS Merger Means For Business
There's still no guarantee of success here. Both companies are struggling, and will continue to do so after this merger. The costs to merge their systems will be high, and I wonder if they can afford it. T-Mobile is now working hard to convince Apple to give then the iPhone, and without that, their chances aren't great. With incompatible networks, that chance won't get any better.

I wish them luck as they will need it.
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