MetroPCS Defends the T-Mobile Buyout


The combination of MetroPCS and T-Mobile USA has passed every regulatory hurdle, leaving a shareholder vote as the last remaining roadblock. But that's not quite a slam dunk: Shareholder-interests defender Institutional Shareholder Services has teamed up with two major owners to scuttle the agreement at the last possible moment.

MetroPCS is very much in favor of the current T-Mobile deal. In a public letter to shareholders on Monday, the company defended the proposed agreement in no uncertain terms (emphasis theirs):

The company argues that ISS based its critique on assumptions that are wildly different from MetroPCS' own. For example, MetroPCS has set $1.5 billion aside for spectrum license acquisitions. ISS believes that this reserve should add $1.5 billion to the value of MetroPCS, but T-Mobile and MetroPCS itself don't agree. "Wireless companies are valued as going concerns based upon EBITDA and cash flow, not asset value," the companies stated. "MetroPCS believes that, should it spend the $1.5 billion on spectrum, its equity valuation will not benefit from the value when adjusting from Enterprise to Equity Value (or value per share)."

In other words, MetroPCS shareholders should count themselves lucky to own 26% of the combined company. Some of the alternative deals proposed by activist shareholders might reduce the MetroPCS stake to as little as 12%.

In the end, it all comes down to financial hand-waving and a bit of "he said, she said." But both companies need this deal to happen, unless they enjoy eating Verizon 's and AT&T 's dust. The two giants dominate the American wireless landscape with roughly 100 million subscribers each. Even together, T-Mobile and MetroPCS only add up to 42 million customers. But their combined spectrum holdings will make T-Metro stronger than the sum of its parts.

This market could use another serious contender, and MetroPCS shareholders would still be silly to vote the deal down.

The mobile revolution is still in its infancy, but with so many different companies it can be daunting to know how to profit in the space. Fortunately, The Motley Fool has released a free report on mobile named "The Next Trillion-Dollar Revolution" that tells you how. The report describes why this seismic shift will dwarf any other technology revolution seen before it and also names the company at the forefront of the trend. You can access this report today by clicking here -- it's free.

The article MetroPCS Defends the T-Mobile Buyout originally appeared on

Fool contributor Anders Bylund holds no position in any company mentioned. Check out Anders' bio and holdings or follow him on Twitter and Google+. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.