Analysts Differ over Potential T-Mobile/MetroPCS Tie-up; Other Buyers Possible
A potential T-Mobile USA/MetroPCS combination would face few regulatory hurdles, but a deal might not solve either company’s problems, analysts said. Deutsche Telekom was reportedly discussing a merger of its U.S. unit with the prepaid carrier in a stock-swap transaction Wednesday. The potential deal would give the German company control over the combined entity, which would be publicly listed, reports said. The companies were also reportedly in talks with other entities.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Getting approvals from the FCC and the Department of Justice for such a deal shouldn’t be a problem, said Jeff Silva with Medley Global Advisors. It’s not surprising if the companies are looking at consolidation opportunities, given their challenges on spectrum and scale, he said. MetroPCS might be a target for any carrier other than Verizon, which is still working on its cable AWS spectrum deal, he said. Due to the failed acquisition of T-Mobile, companies like AT&T would be looking at opportunities to bulk up its spectrum holding, Silva said.
T-Mobile and MetroPCS really on “fundamentally different technology platforms, making a combination a logistical nightmare,” said Craig Moffett with Bernstein Research. MetroPCS is a CDMA operator while T-Mobile’s a GSM-based carrier. It would be years before either is sufficiently transitioned to LTE to make a combination “truly sensible,” he said. The companies declined to comment. Nonetheless, a T-Mobile/MetroPCS deal wouldn’t face significant regulatory challenges, Moffett said.
A potential deal would allow DT to have “a public currency in the U.S., while adding 10-20 MHz of AWS/PCS spectrum to its own 60 MHz of AWS/PCS spectrum, John Hodulik with UBS said. That would bring T-Mobile USA’s spectrum coverage to an average of 70 MHz in the top 100 markets in the U.S. vs. 54 MHz for Sprint, 100 MHz for AT&T and 108 MHz for Verizon, he said. Since PCS would provide T-Mobile with only half of the U.S. coverage, T-Mobile might also look at Leap for another 10-20 MHz of spectrum in the remainder of the country, reaching a total of 81 MHz in the top 100 markets, he said. He also noted the potential integration risks due to the companies’ different wireless platforms.
A potential deal could force Sprint Nextel to buy another prepaid carrier, Leap Wireless, to keep up with its competitors, Moffett said. A potential combination of Sprint and Leap would be more technologically sensible than one between T-Mobile and MetroPCS, he said. Both Sprint and Leap are CDMA operators.