FRANKFURT — Deutsche Telekom has agreed to combine its T-Mobile USA unit with MetroPCS Communications Inc. to create a bigger rival to market leader Verizon Wireless, after failing to sell the business to AT&T last year.
Germany’s largest phone company will own 74 percent of a new U.S. mobile operator and MetroPCS shareholders will get $1.5 billion in cash, the companies said in a statement Wednesday. Deutsche Telekom’s supervisory board and MetroPCS’ board of directors approved the transaction. The combined entity will keep the T-Mobile name.
The deal is the latest attempt by Deutsche Telekom Chief Executive Officer Rene Obermann to revive the fortunes of T-Mobile, the fourth-largest U.S. carrier, more than a decade after the German company entered the American market. The combined entity will have sales of $24.8 billion and 42.5 million subscribers, still behind No. 3 Sprint Nextel Corp.
“The two companies, being smaller players, have struggled to compete,” said David Heger, an analyst at Edward Jones & Co. “Being a larger player, you might be able to gain access to some of the more popular handsets. You might also see some network cost benefits.”
T-Mobile customers won’t be affected much, other than quicker access to a wider LTE network after the deal closes sometime next year. MetroPCS customers will be encouraged to migrate to T-Mobile’s network by the end of 2015, which will enable the merged company to use common network technology.
But in the meantime a tremendous change will take place in the Puget Sound region, where there’s suddenly another giant public company. The merged company will be headquartered in Bellevue and have $24.8 billion in annual sales.
By sales the company is more than twice the size of Starbucks or Nordstrom. It will be the state’s fourth-largest public company behind Costco, Microsoft and Amazon.com. (It would be the fifth if you count Boeing, which is now based in Chicago.)
T-Mobile USA has lost 2.76 million contract customers, or more than 10 percent of its subscriber base, in the eight quarters through June, partly because it doesn’t have the rights to sell Apple Inc.’s iPhone.
T-Mobile USA and Texas-based MetroPCS said Wednesday they target $6 billion to $7 billion in costs synergies through the deal.
The transaction is still subject to MetroPCS shareholder approval and regulatory approvals. The transaction is predicted to close in the first half of 2013, the companies said.
AT&T failed to take over T-Mobile USA last year for $39 billion amid opposition by regulators. In the past two weeks, Deutsche Telekom named John Legere, the former CEO of Global Crossing, to head the U.S. division and agreed to sell the rights to operate T-Mobile USA’s cellular towers for $2.4 billion. “This is not a replay of a debacle that we have seen in the past,” Legere said Wednesday on a conference call.
The Seattle Times’ Brier Dudley contributed this report.
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