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Breaking News: T-Mobile in Talks to Acquire MetroPCS

Phillip Dampier May 9, 2012 Competition, Consumer News, MetroPCS, T-Mobile, Wireless Broadband Comments Off on Breaking News: T-Mobile in Talks to Acquire MetroPCS

Deutsche Telekom AG is in talks to acquire MetroPCS in a stock-swap transaction that would give T-Mobile USA control over the upstart regional carrier.

MetroPCS shares jumped nearly 30 percent on the news, reported by Bloomberg.

MetroPCS operates a CDMA and LTE 4G network incompatible with T-Mobile USA’s GSM service, but would be an asset to T-Mobile’s prepaid phone unit, which could co-exist with T-Mobile’s existing network. MetroPCS primarily operates in the Boston-New York-Washington corridor, Southern California, Florida, southern Michigan, northern Georgia, and northeastern Texas. It is best known for delivering aggressive pricing on no-contract service plans, much like Leap Wireless’ Cricket.

Analysts predict T-Mobile would have little trouble winning approval for a merger between the two carriers. MetroPCS maintains an inconsequential 2.7% market share in the wireless industry. Speculation immediately increased that Leap Wireless’ Cricket unit could be the next target for a merger, potentially with Sprint or T-Mobile.

If T-Mobile sought to assume control of MetroPCS’ spectrum for its own operations, it would have to supply existing MetroPCS customers with new phones that operate on T-Mobile’s network standard.


Sprint Attempts, Pulls Back from Buyout of MetroPCS; Wall Street Questions Management

Phillip Dampier February 27, 2012 Competition, Consumer News, MetroPCS, Sprint, Video, Wireless Broadband Comments Off on Sprint Attempts, Pulls Back from Buyout of MetroPCS; Wall Street Questions Management

An aborted takeover attempt of MetroPCS by America’s third largest cell phone company — Sprint Nextel has some on Wall Street calling for the hide of Sprint CEO Dan Hesse.

The proposed multibillion dollar takeover of prepaid provider MetroPCS, which offers mostly urban service in select cities, was vetoed late last week by Sprint’s own board of directors.

The deal would have delivered a 30 percent premium to MetroPCS shareholders, and further consolidate America’s wireless marketplace. It would have also further complicated Sprint’s financial position — already heavily indebted as it commits to a major 4G wireless service upgrade and deals with an even more expensive commitment to Apple to pitch the iPhone on Sprint’s network.

Reuters reports some investors considered the deal a mistake and are glad it was aborted.

A 30 percent premium seemed “irrational” and would have hurt Sprint shareholders, Roe Equity Research Kevin Roe told the news service.

“He’s on a short leash,” Roe said. “The board did the right thing, thank God. It’s remarkable this deal got this far.”

MetroPCS competes with Sprint’s prepaid services in several regions including metropolitan New York City, northeastern Texas, southern California, southern Michigan and central/southern Florida.  MetroPCS operates its own 4G LTE network.

Now that MetroPCS is considered “in play,” it is likely other suitors may consider buying the company out.  Among the most likely — Leap Wireless, which owns Cricket and operates a comparable service.

Craig Moffett of Bernstein Research has told investors the wireless industry continues to be “crying out for consolidation.”  The most important players in that consolidation story are T-Mobile and Sprint, which remain potential partners if the two companies can overcome their technology differences.  T-Mobile operates a GSM network incompatible with Sprint-Nextel.

[flv]http://www.phillipdampier.com/video/CNBC Sprint Walks Away from MetroPCS Deal 2-24-12.flv[/flv]

CNBC reports Sprint walked away from a takeover attempt of MetroPCS on Friday.  (3 minutes)

Wireless Telecom Roundup: The Big Get Bigger; Smaller Providers Feeling the Heat

Phillip Dampier February 21, 2012 AT&T, Consumer News, Cricket, MetroPCS, Sprint, Verizon, Wireless Broadband Comments Off on Wireless Telecom Roundup: The Big Get Bigger; Smaller Providers Feeling the Heat

A summary of recent quarterly earnings reports from America’s wireless companies:

Verizon Wireless: Verizon has been uncompetitive in the prepaid market for the last several years, as it focused on its postpaid/contract customers.  No more.  Recent price cutting and the introduction of new contract-free plans that offer unlimited calling or packages of features comparable to contract plans are starting to win Verizon a bigger share of the prepaid market.  But Verizon also successfully picked up 1.2 million new contract customers as well, many switching from AT&T or smaller providers.  That’s the second best result the company has had in the last two years.  Verizon has a whopping 87.4 million people on two-year contracts and 21.3 million prepaid customers — 108.7 million total.  Verizon’s iPhone remains popular with 4.3 million activations last quarter.

AT&T: Growth at AT&T achieved its best results in the last quarter of the year, but the company continues to trail Verizon Wireless.  AT&T added 717,000 contract customers last quarter, and has been behind Verizon adding new customers for more than a year.  The company’s reputation for lousy service and policies that antagonize their customers have driven people to look elsewhere — mostly to Verizon.  But iPhone devotees are remaining loyal to AT&T, with one of every five new iPhone activations happening on AT&T’s network.  The company picked up 7.6 million new iPhone activations last quarter.

Sprint: The iPhone is killing Sprint’s balance sheet, but is bringing the company new contract customers.  Historically, Sprint’s most predictable growth has come from its resale agreements with third party providers and its various prepaid service divisions (Boost/Virgin Mobile).  But with the introduction of the Sprint iPhone (1.8 million new activations last quarter), customers looking for unlimited data or a cheaper plan are finding both at Sprint.  Unfortunately for the company, the wholesale cost of the iPhone is eating heavily into the company’s cash on hand.

Leap Wireless/Cricket and MetroPCS: Both companies are facing increasing challenges sustaining their prepaid service business models because of growing competition from larger providers.  Just about everyone who wants a two year contract-cell phone plan already has one, limiting new growth opportunities.  That is forcing AT&T, Verizon, Sprint and T-Mobile to turn their attention to the still-growing prepaid market, which is attractive for the credit-challenged, occasional users, travelers, and those with lower incomes.  Both Cricket and MetroPCS have traditionally targeted urban markets, where their networks are focused, to sell customers inexpensive service plans with convenient payment options.  But their networks don’t extend outside of suburban and urban areas, so roaming expenses can be higher for customers on the go.  Customers of both companies are increasingly looking to larger providers with more robust network coverage and increasingly aggressive pricing.

That has left Cricket with anemic, but acceptable growth, picking up 179,000 new customers in the fourth quarter.  MetroPCS, however, failed to meet expectations with just 197,410 new customers in the fourth quarter.  Existing MetroPCS subscribers are also leaving at a higher rate.

Verizon Buying Portion of Plateau Wireless’ New Mexico Operations

Plateau Wireless serves eastern New Mexico and portions of western Texas.

The consolidation of America’s wireless market continues with this week’s announcement Verizon Wireless intends to acquire a portion of Plateau Wireless’ network operations in southwest New Mexico.

Verizon will take over Plateau’s 259,000 mostly rural customers in portions of Roswell, Carlsbad, Artesia, Hobbs, and Ruidoso, N.M.

The acquisition covers a service territory of 26,100 square miles.

Plateau says the decision came down to money.  The wireless company needs the infusion of cash a Verizon purchase would bring to help finance high speed wireless upgrades.

The FCC will have to review the transaction before it can be approved.

Plateau will continue to service customers in Clovis, Portales, Tucumcari and parts of western Texas.

Moody’s Declares AT&T and Verizon the Winners — Sprint and T-Mobile Can “Never Catch Up”

Phillip Dampier February 15, 2012 AT&T, Competition, Cricket, MetroPCS, Public Policy & Gov't, Sprint, T-Mobile, Verizon, Wireless Broadband Comments Off on Moody’s Declares AT&T and Verizon the Winners — Sprint and T-Mobile Can “Never Catch Up”

Game over. In the championship of cell phone competition, Verizon Wireless and AT&T have won, and it is now too late for Sprint-Nextel or T-Mobile USA to catch up.

That is the conclusion of Moody’s Investors Service, who has determined competition in waning in the U.S. wireless marketplace.

“AT&T Mobility and Verizon Wireless have better network coverage, wider capabilities and wider profit margins which gives them a competitive advantage that smaller rivals just can’t match,” said Mark Stodden, a Moody’s analyst and author of the report. “It is too late for competitors to invest and catch up; Sprint has the willingness but not the ability, while T-Mobile’s parent Deutsche Telekom, is the opposite.”

Sprint’s ambitious plans for a new 4G LTE network have been suppressed by a lack of enthusiasm by Wall Street investors and bankers, who seem to prefer the much-larger AT&T and Verizon who can sustain increased pricing and are better credit risks.  T-Mobile USA has practically been abandoned by its parent owner Deutsche Telekom, which wants to focus its investments in larger markets in Europe.

Moody’s estimates AT&T and Verizon will account for 81 percent of industry earnings in 2011.  Wall Street has pressured Sprint and T-Mobile to seek consolidation to better withstand their larger competitors.  Before AT&T bid for T-Mobile, rumors of an acquisition of the German-owned company by Sprint-Nextel were common, although the two companies operate with different network technology.  Moody’s predicts troubled waters for Sprint if it should actually seek to acquire T-Mobile, because the FCC seems comfortable with a minimum of four national carriers.

Instead, Moody’s predicts Sprint will seek to acquire smaller regional carriers and prepaid providers like Leap Wireless’ Cricket and MetroPCS.  Neither acquisition would significantly improve Sprint’s service footprint, however, as both prepaid providers operate only in larger markets where they already co-exist with Sprint.

AT&T Scores Last (Again) in Consumer Reports’ Ratings; Oddly AT&T Reseller Scores Highest

AT&T has once again scored dead last in a nationwide survey (subscription required) of wireless providers commissioned by consumer magazine Consumer Reports.

Among national coverage carriers, Verizon Wireless again scored the highest, but not highest overall when including smaller independent and regional carriers.  Top honors were won by Consumer Cellular, a relatively small company in Portland, Ore. that ironically depends on bottom-rated AT&T’s network to deliver service.  What sets Consumer Cellular apart from other carriers is its near-exclusive focus on selling phone service to America’s senior population.  Working with groups like the AARP to market simple cell phones to older, less technologically-comfortable customers, over 85% of Consumer Cellular customers are over the age of 50.  The vast majority are occasional cell phone users, primarily using cell phones to make and receive calls.

Regional carrier U.S. Cellular, which used to top Consumer Reports‘ surveys, scored second.  Most U.S. Cellular customers are in the Pacific Northwest, Midwest, and parts of the East including New England.  CREDO, better known under its former name Working Assets Wireless, scored third.  It provides service over the Sprint network.

Among major-sized providers, only Sprint managed to escape the poor ratings for value received by AT&T, Verizon, and T-Mobile.  Also ironic, T-Mobile continued to score better than AT&T, which is still working feverishly to acquire the German-owned carrier.

AT&T also did poorly in delivering reliable voice and data services, according to respondents.  Customer service was also deemed lacking.

Consumer Reports

“Our survey indicates that subscribers to prepaid and smaller standard-service providers are happiest overall with their cell-phone service,” said Paul Reynolds, electronics editor for Consumer Reports. “However, these carriers aren’t for everyone. Some are only regional, and prepaid carriers tend to offer few or no smart phones.”

Consumer Cellular being a prime example. 

Consumer Reports surveyed 66,000 Americans for its 2011 Wireless Satisfaction Survey and found little had changed from last year.  The consumer magazine recommends consumers who don’t make or receive a lot of calls or are not addicted to wireless data services consider a prepaid plan instead of a two-year contract.  Competition in the prepaid arena continues to force prices down, and most providers offer month-to-month service plans that can be automatically renewed through a checking account or credit card, eliminating any hassle purchasing “top up” cards.

Most of the prepaid providers resell service provided by AT&T, Sprint, or Verizon Wireless.  Two that don’t: MetroPCS and Leap Wireless’ Cricket, received little regard from those surveyed.  MetroPCS scored second from the bottom and Cricket didn’t make the ratings at all.  Two prepaid plans to consider first: TracFone, excellent for occasional calling, and Straight Talk, sold by Wal-Mart — better for those who like to talk a lot on their phones.  If you don’t need the sexiest handset around, Stop the Cap! also recommends Page Plus, which relies on the Verizon Wireless network, especially if you don’t need a lot of data services.

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