T-Mobile USA and MetroPCS to Merge

October 3, 2012. Deutsche Telekom and MetroPCS Communications announced that they have signed a definitive agreement to combine T-Mobile USA and MetroPCS.

The transaction requires approvals from numerous regulatory agencies, including the Department of Justice's (DOJ) Antitrust Division, and the Federal Communications Commission (FCC).

AT&T and T-Mobile USA announced merger plans in March of 2011. See, story titled "AT&T to Acquire T-Mobile USA" in TLJ Daily E-Mail Alert No. 2,205, March 21, 2011.

However, the DOJ blocked the merger. See, story titled "DOJ Files Complaint to Block AT&T Acquisition of T-Mobile USA" in TLJ Daily E-Mail Alert No. 2,298, August 31, 2011. While the FCC obstructed and maligned the proposed transaction, it never issued an order denying approval. The companies abandoned the transaction in December of 2011. See, story titled "AT&T and T-Mobile Abandon Merger Effort" in TLJ Daily E-Mail Alert No. 2,320, December 20, 2011.

T-Mobile USA and MetroPCS disclosed in a release that "The transaction is structured as a recapitalization, in which MetroPCS will declare a 1 for 2 reverse stock split, make a cash payment of $1.5 billion to its shareholders (approximately $4.09 per share prior to the reverse stock split) and acquire all of T-Mobile's capital stock by issuing to Deutsche Telekom 74% of MetroPCS' common stock on a pro forma basis. Deutsche Telekom has also agreed to roll its existing intercompany debt into new $15 billion senior unsecured notes of the combined company, provide the combined company with a $500 million unsecured revolving credit facility and provide a $5.5 billion backstop commitment for certain MetroPCS third-party financing transactions." (Parentheses in original.)

Roger Linquist, Ch/CEO of MetroPCS, stated that "the combined company will provide cutting-edge 4G LTE services and accelerate its roll-out of 4G LTE.  In addition, this combination will allow MetroPCS to expand its no-contract offerings into new major metro areas and enhance our combined spectrum portfolio, which provides the potential to offer 4G LTE over at least a full 20x20 MHz in many metro areas.  Importantly, MetroPCS and T-Mobile have the same network strategies and LTE networks in the same spectrum bands".

The two companies' release states that the combined entity will "have the expanded scale, spectrum and financial resources to aggressively compete with the other national U.S. wireless carriers."

Rep. Anna Eshoo (D-CA), the ranking Democrat on the House Commerce Committee's (HCC) Subcommittee on Communications and Technology, stated in a release that "At a time when two companies continue to dominate the wireless marketplace, the need for a strong national competitor has never been greater. The proposed merger of T-Mobile and MetroPCS has the right ingredients to provide consumers with a viable alternative for wireless voice and data service. I hope the FCC and the Department of Justice will conduct a thorough, but swift review of the transaction's merits."

The Free Press's Matt Wood stated in a release that "Wireless consumers have long suffered in an uncompetitive market. We need stronger competitors to push back against the AT&T-Verizon juggernaut, ones that will force these carriers to compete on price and service quality. But consolidation at the bottom between a regional prepaid carrier and the last-place national carrier is not going to fix all of the problems in our wireless market. The FCC is going to have to formulate bold public policies to bring consumers the relief they need."

John Legere, who is now P/CEO of T-Mobile USA, will become P/CEO of the combined entity. Braxton Carter, who is now CFO and Vice Chairman of MetroPCS, will become the CFO. The combined company will operate T-Mobile and MetroPCS as separate customer units, headed by Jim Alling, who recently joined T-Mobile USA as COO, and Thomas Keys, who is now P/COO of MetroPCS, respectively. 

T-Mobile USA has its headquarters in Bellevue, Washington. The combined company will have its headquarters in Belleview, but retain offices in the Dallas, Texas, area, where MetroPCS is based.

T-Mobile USA and Deutsche Telekom are represented by the law firms of Wachtell Lipton, Cleary Gottlieb, K&L Gates, and Wiley Rein. MetroPCS is represented by the law firms of Gibson Dunn & Crutcher, Paul Hastings and Telecommunications Law Professionals.