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MetroPCS shareholders approve sweetened T-Mobile merger

$1.5bn cash offer seals the deal

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Shareholders in US mobile minnow MetroPCS have approved an improved offer from Deutsche Telekom's T-Mobile USA subsidiary after the Germans sweetened the terms of their offer.

Institutional investors had balked at the merger, saying it loaded the company down with too much debt. But Bloomberg reports they have accepted a deal after Deutsche Telekom offered a $1.5bn cash payment to shareholders and a reduction in both the amount of debt MetroPCS carries and a reduction in its interest rate. The German firm has also promised not to sell its stake for at least another 18 months.

"We voted for it because we were happy to see that Deutsche Telekom realized the value contribution MetroPCS made to the combined companies," Roy Behren, who co-manages the $4.7 billion Merger Fund at Westchester Capital, told Bloomberg. "We look forward to having another strong competitor in the wireless industry."

Under the terms of the deal, MetroPCS will make up 26 per cent of the new company, while T-Mobile will keep its name and get access to almost 10 million mobile subscribers and the smaller firm's LTE network, which covers 14 cities.

"This is a major step for Deutsche Telekom," said the company's CEO, Rene Obermann. "The merger with MetroPCS is extremely important, since it enables us to be more aggressive in the USA."

It's quite a change for a company that was nearly sold off to AT&T in 2011, before regulators investigated the merger on competitive grounds. That's unlikely to happen in this case – the Department of Justice has already let its time for objections run out, over the protests of some politicians who fear the deal will lead to job reductions and increased outsourcing of staff.

T-Mobile does have a mountain to climb, however. Years of under-investment in its network (most of its network is HSPA+ and it's only just starting an LTE rollout) and the dominance of behemoths AT&T and Verizon in the American mobile market have left it shedding customers.

But with a sell-off blocked, Obermann has decided to attack the US market. The company now has the iPhone and unlimited data offers, and it kicked off something of a storm with its no-contracts policy, which replaces the hated two-year lock-in that's the norm for many US mobile users with a hire-purchase deal for phones that doesn't lock the user in.

The initial results of that move look promising, and it has created something of a problem for T-Mobile's larger rivals. When asked, Verizon boss Lowell McAdam said that his customers didn't mind two-year contracts, but he'd listen if they did. This prompted a Change.org petition on the issue which has garnered over 125,000 signatures.

If the MetroPCS/T-Mobile merger is a done deal, it will help bring some much needed competition to AT&T and Verizon, and give the German subsidiary access to hardware and customers that it desperately needs. As a bonus, the merger will give it a leg up against both the big boys and third-place operator Sprint. ®

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