This is an interesting thought. MetroPCS is a CDMA company while T-Mobile is GSM. When AT&T was going after T-Mobile is was a very strategic move. Since the DOJ put a halt to that, why would T-Mobile want MetroPCS? The answer is very simple, remember back when AT&T was trying to merge it was because T-Mobile had money and no spectrum while AT&T had spectrum and no money. With this new move T-Mobile who still has no spectrum can use MetroPCS’s huge LTE footprint to boost their size. The question remains will regulatory restrictions make this fail also?
Hit the break for the full story….
May 9 (Bloomberg) — Deutsche Telekom AG is discussing a merger of its T-Mobile USA unit with MetroPCS Communications Inc. as it reviews options for the customer-losing business, according to people familiar with the matter.
Deutsche Telekom is considering a stock-swap transaction that would give the German company control over the combined entity, which would be publicly listed, said two of the people, who declined to be identified because the talks are private. Other options include an initial public offering or an outright sale of T-Mobile USA, the people said, adding that Deutsche Telekom is also in talks with other companies.
Europe’s second-biggest phone company, whose $39 billion sale of T-Mobile USA to AT&T Inc. failed last year due to regulatory resistance, wants to bolster the business’ ability to gain size and win clients, the people said. Following the deal’s collapse in December, T-Mobile USA cut jobs and stepped up investments in faster networks as it tries to stop a flight of contract customers to rivals.
“The thing they lack is size and it would be easier to be part of something larger,” said Alexandre Iatrides, an analyst at Oddo & Cie. in Paris who recommends investors reduce their holdings in Bonn, Germany-based Deutsche Telekom. Combining with a smaller player “isn’t really the option they prefer, but they don’t really have a choice” after the disposal plan failed, he said, adding that Sprint Nextel Corp. could be a viable, alternative partner.
Sprint discussed buying T-Mobile USA last year, people familiar with the talks said at the time. It also abandoned plans to buy MetroPCS, people with knowledge of those discussions said in February. Sprint is on the lookout for deals that would help it pose a more credible threat to bigger competitors Verizon Wireless and AT&T.
Deutsche Telekom spokesman Andreas Fuchs, MetroPCS spokesman Drew Crowell and Sprint spokesman Bill White declined to comment.
MetroPCS had been the frontrunner to buy assets from AT&T and T-Mobile when the two companies sought to complete their deal, people familiar with the matter said last year.
The current negotiations with Deutsche Telekom are complicated by a 27 percent decline by MetroPCS shares this year and might fail, the person said.
MetroPCS is also in discussions with other potential partners, the people said.
T-Mobile USA’s 33 million clients make it the fourth- largest wireless provider in the country, behind Verizon Wireless, AT&T and Sprint.
Shrinking Client Base
Deutsche Telekom’s wireless U.S. business last year lost 1.65 million contract customers, or 6.2 percent of its base of highest-paying users. The division’s bet on devices running Google Inc.’s Android system failed to stem customer losses as bigger rivals Verizon Wireless, AT&T and Sprint lure users with Apple Inc.’s iPhone.
Verizon Wireless added 501,000 contract customers in the first quarter, while AT&T netted 187,000. Sprint added users for its main brand, though it lost a total of 192,000 contract users for all its services. MetroPCS, based in Richardson, Texas, reported a quarterly gain of 132,000 new customers.
Deutsche Telekom, which is scheduled to report earnings tomorrow, may say T-Mobile USA lost another 470,000 contract customers in the quarter ended March 31, according to the average estimate of seven analysts compiled by Bloomberg.
In March, T-Mobile USA said it was cutting 1,900 jobs and closing seven of its 24 call centers to adjust costs to a shrinking customer base. Deutsche Telekom has said it is looking at other strategic options including a sale of T-Mobile’s U.S. tower network.
AT&T and Deutsche Telekom both agreed to abandon the T- Mobile USA deal, which would have created the largest U.S. mobile-phone operator. Deutsche Telekom cited unwillingness by the U.S. Justice Department and the Federal Communications Commission to change their “non-supportive stance” even after the companies proposed changes to the size and structure of the transaction. The Justice Department had sued to block the deal.