Telecom Lead America: MetroPCS Communications (PCS) shareholders have approved a sweetened deal to merge with Deutsche Telekom (DTE)’s T-Mobile USA in a vote that gives the German company a chance to revive its U.S. business.
The transaction will probably be completed by May 1 after today’s ballot cleared the final hurdle for the combination of the country’s fourth- and fifth-largest wireless carriers.
Roger D Linquist, chairman and CEO of MetroPCS, said: “Our combination with T-Mobile will create the value leader in the U.S. wireless marketplace, and we are confident that the combination of these two outstanding businesses is the best outcome for MetroPCS and our stockholders and will maximize stockholder value. We look forward to completing the combination shortly and delivering compelling value to the stockholders and customers of the combined company.”
Bowing to shareholder pressure, Deutsche Telekom on April 10 agreed to lower the size and interest rate of a loan to the joint company. The transaction adds more than 9 million prepaid customers to T-Mobile, as well as wireless spectrum needed to provide faster data services to compete with market leaders Verizon Wireless and AT&T Inc. (T)
T-Mobile lost 13 percent of its contract customers between 2009 and 2012 as it lagged behind peers in constructing faster networks and offering Apple’s iPhone. As T-Mobile began to offer the device this month, CEO John Legere will have to show that a strategy of scrapping long-term contracts will win back subscribers.
The carrier, which has earmarked network investments of $4.8 billion this year, last month switched on its own high- speed service using the long-term evolution technology.
The improved merger terms, which cut the shareholder loan to $11.2 billion from $15 billion and trim the interest rate by half a percentage point, won the endorsement of MetroPCS’s largest investor, Paulson & Co., as well two shareholder- advisory firms in the run-up to the vote.
The deal gives Deutsche Telekom a 74 percent stake in the merged entity and MetroPCS shareholders a $1.5 billion cash payment. The enlarged T-Mobile USA will be exchange-listed and Deutsche Telekom has agreed not to sell the shares on the market for 18 months.
By combining two lower-cost service providers, the merger will aid Legere’s plan to undercut the industry’s established ways of doing business.
