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.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/T-Mobile CEO Speaks About Combined Company with MetroPCS 10-3-12.flv[/flv]

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)

Deutsche Telekom AG, parent company of T-Mobile USA today confirmed it was in talks with MetroPCS Communications, Inc., to merge their two wireless businesses to achieve the greater scale both need to compete with Verizon Wireless and AT&T.

Bloomberg News reports DT’s supervisory board will meet tomorrow to approve the transaction.

The sixth largest wireless company in the U.S. is about to merge with the fourth largest, according to news reports.

The combination would inject an additional 9.3 million current MetroPCS customers (the sixth largest wireless carrier) into the T-Mobile USA family. That would more than make up the 2.76 million former T-Mobile contract customers that fled the carrier during the last two years, especially after learning the company was planning to merge with AT&T.

But some challenges are likely to remain after the merger gets government approval:

• T-Mobile remains largely a postpaid, 2-year contract-oriented company while MetroPCS operates a no-contract, prepaid offering. T-Mobile could transition its prepaid division to MetroPCS’ branding, or fold MetroPCS into T-Mobile and eventually discontinue the MetroPCS brand;
• MetroPCS operates a CDMA network incompatible with T-Mobile’s GSM network. Both carriers are moving towards adopting 4G LTE service, but legacy customers will not be able to use existing phones on each other’s networks.

MetroPCS currently offers home coverage in 19 metropolitan markets and surrounding areas including New York City/Northern New Jersey, Atlanta, Bakersfield, Boston, Dallas, Detroit, Jacksonville, Las Vegas, Los Angeles, Miami, Orlando, Philadelphia, Providence, Riverside, Sacramento, San Francisco, San Bernardino, San Jose, Shreveport, and Tampa.

[flv]http://www.phillipdampier.com/video/CNBC T-Mobile Deal For PCS in the Works 10-2-12.flv[/flv]

CNBC reports on the planned merger of MetroPCS and T-Mobile USA, the first major wireless merger deal since the rejected merger of T-Mobile USA and AT&T.  (3 minutes)

Apple’s iPhone 5 Wi-Fi bug is showing up on several wireless networks.

Wireless companies with usage caps are in the money — your money — if you happen to own Apple’s iPhone 5. A serious bug afflicting the phone’s ability to connect and hold a Wi-Fi connection when using certain wireless security protocols is chewing up customers’ data allowances and exposing them to overlimit fees, even when they think the phone is connected to a free use Wi-Fi network.

So far, Verizon Wireless has confirmed the problem is impacting their customers, but our readers report problems with AT&T and Sprint iPhones as well.

“Under certain circumstances, iPhone 5 may use Verizon cellular data while the phone is connected to a Wi-Fi network,” said Torod Neptune, a spokesman for Verizon. “Apple has a fix that is being delivered to Verizon customers right on their iPhone 5. Verizon Wireless customers will not be charged for any unwarranted cellular data usage.”

Stop the Cap! reader John Pozniewicz thinks that is nice of Verizon, and wonders when AT&T will start dealing with the nearly $100 in overage fees he has already run up on similarly afflicted iPhone 5 smartphones he bought just last week.

“As best as I can tell, the problem seems to relate to the type of Wi-Fi security protocol your router has enabled,” Pozniewicz reports. “Many in the Apple community forums and I both agree the most likely culprit is AES encryption.”

Sprint customer Halle Thompson also wrote Stop the Cap! yesterday reporting her Sprint iPhone 5 was unable to hold its Wi-Fi connection either, forcing her to deal with Sprint’s slow 3G network, even when at home.

“Thank goodness Sprint doesn’t have a usage limit and overage fees or they would own my house by now, because I use my phone for everything,” Thompson says.

Thompson switched off her router’s wireless security and the problem disappeared, but now her Internet connection is open to everyone in her apartment complex. Pozniewicz spent the weekend experimenting with wireless security protocols and quickly found AES caused his Wi-Fi connection to become unstable.

If your readers are having the same problems I am, here is a workaround that will keep your router reasonably secure and accessible until the pointy heads at Apple figure out this disaster:

Recommended Security Settings:

• WPA only (least secure)
• WPA2 only
• WPA or WPA2 with TKIP

Not recommended:

• AUTO – AES
• WPA or WPA2 with AES enabled
• WPA or WPA2 with both TKIP and AES enabled

Verizon Wireless has told customers it will credit back any overage fees incurred as a result of the bug, but only if they ask. Customers should also demand Verizon reset their allowance or at least note their account regarding the problem. Customers should request credit for overlimit fees for both September and October, because early reports indicate the software update designed to fix this problem has not worked in all cases.

Pozniewicz is having much less success with AT&T which so far has refused all comment on the debacle and has been unwilling to issue any service credits for overages. Pozniewicz is upset, noting he has only had his iPhone 5 for a week and it has already cost him and his company an extra $100.

“I am extremely careful about only using Wi-Fi for anything that will consume a lot of data, but my only clue there was a problem was when I noticed how slowly my so-called ‘Wi-Fi’ connection was performing at home and work and that is when I discovered it was not actually using Wi-Fi at all,” Pozniewicz says. “What is insidious about this is that the Wi-Fi connection is still showing on the phone display, even when I am actually using AT&T’s network.”

Thompson reports her phone does seem to initially connect to Wi-Fi, but then loses the connection seconds or minutes later, eventually switching to Sprint’s 3G or 4G cellular networks. Sprint’s unlimited data plan makes the issue just an inconvenience. For Pozniewicz’s company, which has a contract for a dozen iPhones 5’s with AT&T, the overlimit fees are really adding up. His employees are also quickly burning through their own monthly data allowances.

“AT&T is a pack of vampires and they don’t care about anything other than my money, even after talking to two supervisors, one of which implied I was either lying about the problem or an idiot,” he said.

Here is how iPhone 5 customers can check their data usage: Select Settings, then General, then Usage, then Cellular Usage to see what your phone reports you have used thus far. If the numbers seem wildly out of whack, contact your wireless carrier and let them know you may be afflicted with the iPhone 5 bug and have them note your account for future credit for any subsequent overlimit fees.

Verizon customers should have already received a software update in an effort to correct the problem. You can verify this by following these steps:

1. Select Settings, then General, then About.
2. Wait for the message “Carrier Settings Updated,” then touch OK.
3. Allow the update (if any) to install.
4. If your phone does not automatically restart after the update is complete, turn the phone off and then on again to complete the update.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/iPhone 5 Wifi connection issue.flv[/flv]

iPhone 5’s Wi-Fi problems documented by YouTube user “MNeuenswander,” who found changing the security protocol on his router seemed to resolve the problem.  (2 minutes)

Verizon Wireless is dealing with the appearance of fraudulent “look-a-like” websites purporting to offer special discounts and features for customers willing to give up account information that could expose them to future fraud.

In the most recent examples, “VZ for Me” and “It’s Fall at Verizon,” customers are asked to give up their Verizon login and phone information that could result in phone cloning and service theft.

The latest generation of phony websites are virtually indistinguishable from legitimate ones, with fully functioning web pages and depth of content. The only two giveaways:

1. The website does not use the appropriate URL (vzforme.com and itsfallatverizon.com vs. verizonwireless.com);
2. Once logged in, the website cannot actually divulge any account information it never had access to, unless the customer supplies it themselves.

News reports about the sites have triggered actions ranging from browser blocks, which warn about potentially fraudulent sites and Verizon Wireless’ own successful takedown campaign.

Consumers are advised to avoid any links found in e-mail messages or web pages that offer to take you to a company’s website. The safest way is always to type the web address yourself.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/KIFI Idaho Falls Investigation Fake Verizon Wireless site targets S-E-I-D 9-23-12.mp4[/flv]

KIFI in Idaho Falls reports on its special investigation of phony Verizon Wireless websites phishing for customer data.  (3 minutes)

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Sprint Liquidity Doesnt Fix Company 9-26-12.mp4[/flv]

Sanford Bernstein’s Craig Moffett is back on Bloomberg News dismissing Sprint’s business strategy and lamenting the cost of subsidizing Apple’s iPhone 5 for existing customers who don’t really ‘need’ a new phone. Moffett sees all downsides for America’s third largest carrier (in May he gave the company a 50-50 shot of landing in bankruptcy court), trying to compete against a virtual duopoly successfully maintained by AT&T and Verizon. He thinks iPhone subsidies and purchase guarantees cost Sprint too much, their 4G LTE network is too little, too late (and will never perform as well as larger competitors who have lower frequency spectrum available for better reception), and their stock is overvalued. Wall Street routinely brings out analysts cheerleading additional mergers and acquisitions for further consolidation in the wireless market. By cutting down Sprint, Wall Street continues to emphasize it has already picked winners (AT&T and Verizon) and losers (Sprint, T-Mobile, everyone else).  (6 minutes)