T-Mobile USA and MetroPCS have struck a deal on a merger under the supervision of T-Mobile’s parent company Deutsche Telekom. The European telecommunications giant will own majority of the stake in the merged business.
The deal was announced on Tuesday. Deutsche Telekom will grab 74 percent stake in the merger while MetroPCS Communications owners will have the rest. Experts had speculated a bigger share to the PCS investors. UBS expected up to 38%; Nomura and Deutsche Bank forecast 30%.
T-Mobile, the number 4 telecom company in the US with a subscribers’ cachet of 33.2 million customers is losing its market share to the likes of Verizon Wireless and AT&T, the top two players in the market, because of the new 4G LTE technology.
T-Mobile averred that the deal will help them expand their network to the remote areas in the US. The company also said that it will replace CDMA-based network by 2016 with the advanced LTE spectrum.
“This is not a deal about surviving,” John Legere, recently named CEO of T-Mobile USA, said on a media conference call. “This transaction signals our staying power in the U.S. and our commitment to the U.S. … T-Mobile is here to stay.”
The merger will let T-Mobile fuse together the spectrums of both companies and make 4G LTE readily available in the country.
“It’s a deal about spectrum,” Roger Entner of research firm Recon Analytics said in a statement. “It makes T-Mobile a lot stronger because it can offer LTE almost anywhere.”
The merger deals a blow to Sprint Nextel, who had been in talks with MetroPCS for a possible merger earlier in the year. The company had also attempted to merge with T-Mobile last year but the proposal was rejected by US regulators. However, some experts still see a possible deal between Sprint and the new T-Mobile/MetroPCS composite but it will sees big hurdles from the government.
MetroPCS share were down 18 percent on Wednesday after hiking 10 percent on Tuesday following the news.