Report: T-Mobile Close to Buying MetroPCS
NEW YORK (AP) — The parent of T-Mobile USA, the country's fourth-largest cell phone carrier, is reportedly close to a deal to buy smaller MetroPCS Communications (NYSE: PCS) .
Bloomberg News said Tuesday that the board of Deutsche Telekom AG (OTC: DTEGY), the German company that owns T-Mobile USA, is set to vote on the deal Wednesday.
The companies did not immediately respond to requests for comment.
The Bloomberg report did not say what Deutsche Telekom would pay. Before the report, MetroPCS had a market capitalization of $4.2 billion. Its shares shot up $2.19, or 19 percent, to $13.71 in midday trading on the news. In an initial surge, it went as high as $14.51, the highest level in more than a year.
Deutsche Telekom shares rose 2 percent in European trading. It has a market capitalization of $54.5 billion.
Buying Dallas-based MetroPCS would add 9.3 million subscribers to T-Mobile USA's 33.2 million. The combined company would still trail No. 3 Sprint Nextel in size.
A complicating factor would be that MetroPCS and T-Mobile USA use different network technologies, which means that MetroPCS phones would not work on T-Mobile USA's network, and vice versa. However, both companies are deploying the same "fourth-generation" or "4G" technology, which means they're on a path to converging their networks.
Through the deal, T-Mobile USA would gain access to more space on the airwaves, a critical factor as cell phone carriers try to expand their capacity for wireless broadband. Last year, AT&T struck a deal to buy T-Mobile USA for $39 billion for much the same reason, but that deal was shot down by regulators, who believed competition would suffer if the second-largest cell phone company were to gobble up the fourth-largest.
Regulatory concerns would be much milder over a T-Mobile-MetroPCS combination. Both companies are relatively small, and T-Mobile USA is losing subscribers.
T-Mobile USA is based in Bellevue, Wash.