Telecom operator T-Mobile US is set to acquire Ka’ena Corporation and its subsidiaries, for $1.35 billion targeting customers of Mint Mobile – in a cash and stock deal.
Leading brands such as Mint Mobile, a direct-to-consumer prepaid brand; Ultra Mobile, an international calling service; and wholesaler Plum, will be part of the deal. Mint Mobile is operating as a MVNO on the mobile network of T-Mobile.
The deal will allow T-Mobile to tap a larger share of the pay-as-you-go customer base, whose numbers are expected to swell as credit-challenged people shy away from hefty monthly bills.
It will provide a boost to T-Mobile’s business at a time when promotions from rivals Verizon and AT&T have driven up its churn rate, which refers to the percentage of customers who stop using a service.
The Mint and Ultra brands are complementary to the company’s current prepaid service offerings Metro by T-Mobile, T-Mobile branded prepaid and Connect by T-Mobile.
“Mint has built an incredibly successful digital direct-to-consumer business that continues to deliver for customers on the Un-carrier’s 5G network,” said Mike Sievert, CEO of T-Mobile. “We’ll benefit from applying the marketing formula Mint has become famous for across more parts of T-Mobile.”
Mint’s founders David Glickman and Rizwan Kassim will remain onboard at T-Mobile to manage the brands. T-Mobile will run these brands as a separate business unit. Owner Ryan Reynolds will continue on in his creative role on behalf of Mint.
T-Mobile will pay up to a maximum of $1.35 billion in a combination of 39 percent cash and 61 percent stock to acquire Ka’ena. The actual price to be paid by T-Mobile will be based on Ka’ena’s performance during certain periods before and after the closing.
T-Mobile does not currently expect the transaction to have any impact on the company’s 2023 guidance or its ongoing stock repurchase program. The transaction is expected to be slightly accretive to both Core Adjusted EBITDA and Free Cash Flow as T-Mobile captures the long-term economic value of the Ka’ena business.
Mint Mobile and Ultra Mobile will shift from being mobile virtual network operators (MVNOs) to become T-Mobile-owned digital sub-brands, existing alongside Metro by T-Mobile, T-Mobile branded prepaid and Connect by T-Mobile, and contributing their own subscriber bases to boost T-Mobile’s overall prepaid rolls, which reached 21.6 million subscribers in 2022.
Mobile brands worldwide are shifting towards digitalization to reduce their go-to-market costs, as having full-featured apps and digital self-service tools enables customers to sign up for service or change their rate plans quickly and seamlessly without the need for an in-store visit or call to telesales, with the simplified process often resulting in higher customer satisfaction.
“Acquiring Mint will provide T-Mobile with expertise in digital branding, sales and customer care that it can expand upon with its other brands. However, because customers increasingly seek hybrid shopping and customer care experiences, T-Mobile is expected to also expand the presence of both Mint and Ultra across its distribution footprint,” Tammy Parker, Principal Analyst at GlobalData, said.
The transaction should face less regulatory scrutiny than T-Mobile’s previous acquisitions of MetroPCS and Sprint because Mint and Ultra do not have their own mobile networks. Plum is a mobile virtual network aggregator (MVNA) that has worked with T-Mobile to offer turnkey programs to other MVNOs that want to ride on T-Mobile’s network. Plum will bring additional competence to T-Mobile in attracting additional third-party brands that can leverage its 5G network.
