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Deutsche Telekom Approves T-Mobile USA, MetroPCS Merger – MetroPCS Network Shutting Down

The parent company of T-Mobile USA has agreed to buy MetroPCS in a reverse stock split that leaves parent Deutsche Telekom able to eventually spin off the combined entity as an independent company and exit the U.S. market.

The merger will bolster T-Mobile’s mobile spectrum in several large cities, with up to 20MHz available for a robust LTE 4G network, better positioning the company to compete with third-place Sprint.

T-Mobile plans to decommission the smaller carrier’s CDMA network by 2015, gradually shifting  MetroPCS users to T-Mobile’s HSPA+ and LTE networks as customers purchase new equipment. MetroPCS customers will find T-Mobile phones for sale immediately after the deal closes.

“We have no plans to smash together T-Mobile’s GSM and MetroPCS’ CDMA customers together,” said T-Mobile CEO John Legere, defending against any comparison with the Sprint-Nextel merger. “We will be encouraging customers to switch to T-Mobile’s network as customers upgrade their phones.”

Legere says any customers still using MetroPCS’ network during the last 8-12 months before the network is decommissioned will be offered a strong incentive, such as a deeply discounted phone, to move.

Legere

Legere adds the deal will cement T-Mobile’s position as America’s only nationwide carrier offering truly unlimited 4G HSPA+/LTE wireless data service. Sprint’s network still largely depends on 3G and an older, slower standard called WiMAX. Legere says T-Mobile will now become the nation’s largest no-contract phone carrier, and will emphasize it welcomes customers who bring their own phones to the carrier.

Legere adds T-Mobile’s new 4G network will be able to rival the quality of its larger competitors when it is fully deployed.

“The T-Mobile and MetroPCS brands are a great strategic fit – both operationally and culturally,” René Obermann, the chief executive of Deutsche Telekom, said in a statement. “The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate.”

But the merger also may trigger an even larger wave of wireless consolidation in the industry, as remaining players jockey for position in response to today’s announcement. Both Sprint and Leap Wireless, which owns Cricket, are under increasing pressure from investors to respond. Leap Wireless could soon face a takeover bid itself, either from T-Mobile USA or Sprint. Some investors are even calling for Sprint and T-Mobile to merge, becoming a more effective competitor for Verizon and AT&T.

The proposed  merger still needs approval from the Federal Communications Commission. Regulators are not likely to oppose deals with either MetroPCS or Leap Wireless, as both smaller carriers operate networks that largely do not overlap and both hold only a minuscule market share.

German investors wary about T-Mobile’s new emphasis on prepaid service, considered a negative in Europe, were reassured by Legere that Americans pay higher prices for prepaid, no contract service than what is prevalent in Europe.

The combined T-Mobile/MetroPCS remains the fourth place carrier with 42.5 million customers. Sprint has 56.4 million customers.

T-Mobile CEO John Legere talks about the benefits of combining T-Mobile USA and MetroPCS. “This isn’t a deal to survive – it’s to thrive.” (5 minutes)

Currently there are 3 comments on this Article:

  1. Duffin says:

    I don’t understand the point of this…they have two conflicting networks, one of which will eventually be shut down. It’s not as if they will keep the customers they have for long since there’s no guarantee that once the MetroPCS customers are required to either upgrade or leave, that they will stay. They have no real reason to stay specifically with T-Mobile, especially if they prefer a CDMA network. And, it’s not like T-Mobile gets to more coverage area with this, either. It seems the only benefit they are going to get are some guaranteed customers until 2015 and maybe then get to keep them after that.

  2. Ian L says:

    There are two big winners here:

    1. Deutsche Telekom. They can now sell shares in TMoUSA as they see fit. They also own a lot of the company’s debt, which they’re getting a handsome 8% interest on (I have a credit card that isn’t much worse than that).

    2. T-Mobile…to an extent. There are a couple of areas where T-Mobile + MetroPCS = tons of AWS spectrum, where T-Mobile can easily deploy LTE. Not quite as much spectrum as, say, Everything Everywhere has in the 1800MHz band (90 MHz), but still respectable (there are a number of markets with 50 or 60 MHz of AWS spectrum, plus another 30-40 MHz of PCS).

    Dallas is the example T-Mobile is trotting out right now for super-high-bandwidth FD-LTE and HSPA+ networks. By the second half of 2015, metroPCS’s network will be completely gone in Dallas, leaving T-Mobile with 60MHz of AWS and 40MHz of PCS to do with what it pleases. In T-Mobile’s case, that translates to four HSPA+ carriers (three in PCS, one in AWS), a 5×5 MHz slice of GSM and 25MHz in each direction of LTE, probably configured as a 5×5 MHz channel and a 20×20 MHz channel.

    In contrast, AT&T has enough spectrum in 700MHz for 10×10 LTE, plus another 5MHz or so unpaired downlink. a 5×5 swath of AWS, 10x10MHz of PCS and both Cellular blocks (25×25 MHz), for a total usable spectrum count of 105MHz. The catch is that AT&T has more than twice the subscriber count of TMo+metro, and it may be awhile before they get phones/gear in place to support their unpaired 700 or cellular frequencies on LTE. AT&T may also have some WCS coming down the pike, but that’ll be awhile.

    In contrast, Sprint has the same 54MHz of spectrum (40MHz PCS, 14MHz SMR) for CDMA and LTE that it does in most areas in the US. Of that, around 14MHz needs to stay put in CDMA-land, leaving 40MHz (30MHz in PCS, 10MHz in SMR) for LTE. Not nearly as nice of a situation as T-Mobile will be in, but Sprint can beat T-Mobile on coverage with SMR LTE, and Clearwire can add capacity in 2500MHz via TD-LTE if it ever gets its act together (highly likely…and they have a lot of spectrum in Dallas).

    Then there’s Verizon. 30MHz of PCS, 20MHz of AWS and 20MHz of usable 700MHz combine for a total footprint of 70MHz. If this, 20MHz is already turned on for LTE, and another 20MHz (AWS) will follow relatively soon. Getting Verizon to put LTE on PCS may take awhile.

    So T-Mobile may end up as the fastest wireless service in Dallas, thanks to MetroPCS. Other areas may very.

    • Yes, but isn’t much of this spectrum on much higher frequencies that simply won’t perform as well indoors? Clearwire is the worst case scenario. They own a ton of spectrum but it absolutely works terrible once you get inside. Not all spectrum is created equally, which is why my friends with Sprint see their signals fall to pieces when inside stores where my Verizon 700MHz service is still there (albeit weaker).

      T-Mobile and Sprint actually do have respectable levels of service in urban areas, but neither perform as well as AT&T and Verizon when inside.

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