By Lisa Johnston
New products on display at the American International Toy Fair, held in N
New York –Carriers T-Mobile and MetroPCS have agreed to a merger that they said will deliver the scale, spectrum and financial resources to expand geographic coverage, offer an improved selection of handsets and services, and compete aggressively with the nation’s larger carriers.
The combined company will retain the T-Mobile name, but the T-Mobile and MetroPCS brands will be retained, and MetroPCS will be operated as a separate unit. As a result, the new entity will introduce MetroPCS plans and services to a larger number of areas to complement T-Mobile’s offerings, the companies said.
The merger will also enable the companies to “deploy a deeper and more robust LTE rollout, particularly in major metropolitan areas,” the companies said in a statement. And the companies expect to realize $6 billion to $7 billion in cost savings.
Both brands will retain their value focus. MetroPCS exclusively sells no-contract plans, and T-Mobile offers a mix of no-contract and contract plans.
The agreement must still be approved by MetroPCS shareholders and the Federal Communications Commission (FCC). The companies expect the transaction to close in the first half.
MetroPCS shareholders will receive $1.5 billion in cash and 26 percent ownership in the combined company, while T-Mobile parent Deutsche Telekom will get a 74 percent stake.
The merger would combine T-Mobile, the nation’s fourth largest carrier by subscribers, with the nation’s fifth largest carrier, MetroPCS, which operates a network in only 14 major metropolitan areas, though its subscribers can roam at no extra cost in markets with a population of 280 million people. The 14 markets of Metro PCS include Atlanta, Boston, Dallas-Fort Worth, Detroit, Jacksonville, Las Vegas, Los Angeles, New York City, Miami, Orlando, Philadelphia, Sacramento, and San Francisco.
With the merger, the combined company will still be ranked fourth in subscriber count.
Both carriers’ networks operate in the 1.9GHz and 1.7/2.1GHz bands. Although MetroPCS is a CDMA carrier, and T-Mobile is a GSM carrier, both companies are migrating to 4G LTE. Existing MetroPCS customers will be migrated to a common LTE-based network as they upgrade their handsets, the companies said.
The combined company will have projected 2012 pro forma revenue of $24.8 billion and 42.5 million subscribers.
After closing, the combined company’s headquarters will be in Bellevue, Wash., where T-Mobile is currently headquartered. The combined company will also retain a “significant presence” in Dallas, where MetroPCS is headquartered.
The combined company is expected to continue trading on the New York Stock Exchange.
John Legere, currently president/CEO of T-Mobile, will be president/CEO of the new company. J. Braxton Carter, currently MetroPCS’s CFO and vice chairman, will become CFO. The T-Mobile unit will be led by Jim Alling, current T-Mobile COO, and the MetroPCS unit will be led by Thomas Keys, current MetroPCS president/COO.
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