T-Mobile and Metro PCS Get Hitched
A year ago, Deutsche Telekom division T-Mobile USA was watching its engagement with AT&T (NYSE: T ) fall apart. Adding T-Mobile to one of the two largest telecoms in America was ultimately deemed to be bad for consumers, the deal was blocked by regulators, and Ma Bell handed over a generous breakup fee.
Well, if at first you don't succeed, you go back to the bar with a new set of pick-up lines.
The rumor mill has been busy lately, suggesting that the fourth-largest network might hook up with Sprint-Nextel (NYSE: S ) , Leap Wireless (Nasdaq: LEAP ) , or MetroPCS (NYSE: PCS ) .
All this rumor-mongering can wear on one's nerves, so T-Mobile decided to make it official today: The lucky partner is prepaid service expert MetroPCS.
Regulators are not likely to shoot this deal down. Rather than reducing consumer choice by making a leader even stronger, this combination adds muscle to one of the little guys in the wireless market. The 9 million MetroPCS subscribers plus 33 million T-Mobile users add up to 42 million, still light-years behind dueling elephants AT&T and Verizon (NYSE: VZ ) , and smaller than Sprint's 56 million subscribers.
If approved by all necessary parties, the deal should close by next summer. T-Mobile then becomes a publicly traded company thanks to a reverse-merger deal structure. MetroPCS investors were hoping for a bigger price tag, judging by the stock's 8% price drop on the news. But MetroPCS still trades about 7.5% higher now than it did a week ago, and 120% above the rock-bottom lows that were set in June. I'd be surprised if MetroPCS shareholders vetoed this marriage.
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