MetroPCS Excited by T-Mobile Deal, Irked at Sprint Rumors
Speaking to investors offstage at the UBS Media and Communications conference in New York this week, according to news reports, MetroPCS CEO Roger Linquist made it quite clear what he thought of a possible Sprint Nextel counteroffer to T-Mobile's proposed deal to acquire his company.
"It's a huge distraction," he said, calling Sprint an "interloper."
Speculation about a Sprint bid for MetroPCS had been building ever since T-Mobile announced its intention to buy MetroPCS. It had reached its highest point when Sprint and SoftBank postponed filing their merger proxy statement/prospectus with the SEC. To some investors, that was a sign that Sprint was ready to make a move on MetroPCS.
But, after Reuters reported several knowledgeable sources saying that such a bid from Sprint would not be forthcoming, the price for MetroPCS shares dropped 7% on Tuesday.
"Everybody's focused on the interloper," said Linquist. Investors should be looking instead at the "significant opportunity for cash flow improvement," of the combined T-Mobile and MetroPCS.
When onstage for his formal presentation at the conference, Linquist was quick to point out one of the advantages of the new publicly-traded company that MetroPCS and T-Mobile will form.
I must tell you, I think the nature of this scale that this brings can help us with one of the big [problems] limiting [us] today, which is handset pricing. Subsidies that we all face ... are a major factor in our operating margins ... [This deal] will give us an opportunity to get the handset costs, we believe, at a lower level than we've been able to achieve in the past.
However, the more recent announcement from Rene Obermann, the CEO of T-Mobile's parent company Deutsche Telekom, that T-Mobile will be selling "Apple products," may dilute that expected subsidy advantage. Apple has been able to command the highest prices for its iPhones and iPads, and much of that cost is eaten by the carriers in order to sell subscribers on long-term contracts.
When asked about avoiding massive customer disruptions during the merger process, Linquist was able to get one more dig in on Sprint. "This is not a Sprint Nextel," he said, referring to the problems Sprint encountered trying to make Sprint's and Nextel's two very different networks work smoothly.
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The article MetroPCS Excited by T-Mobile Deal, Irked at Sprint Rumors originally appeared on Fool.com.Fool contributor Dan Radovsky has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.FG
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