T-Mobile, MetroPCS Make Merger Arguments at FCC
T-Mobile and MetroPCS need to merge to have the scale to challenge Verizon Wireless and AT&T, the two combining companies said in an FCC filing Friday. It said the new company formed will be called Newco, to be renamed T-Mobile, and will have enough spectrum to support 20 x 20 MHz LTE deployments in many parts of the U.S. The two also said combined they don’t hold spectrum above the levels in the most recent screen in any U.S. market. Parts of the carriers’ arguments were redacted from the public version of the filing. The deal, in which T-Mobile USA parent Deutsche Telekom is buying MetroPCS to merge it with its U.S. subsidiary, was announced Oct. 3 (CD Oct 4 p1). That deal and Softbank agreeing last week to buy control of Sprint Nextel may mean smaller carriers will be bought by the Big Four, analysts predicted. (See separate report below.)
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"The Commission is well aware of the scale and spectrum challenges facing T-Mobile USA and MetroPCS in competing today on a stand-alone basis,” T-Mobile and MetroPCS’s filing said. “This transaction will strengthen and better position a combined Newco to compete on terms that neither company could achieve on its own. In so doing, the proposed transaction benefits not only the customers of T-Mobile USA and MetroPCS, but the wireless industry and consumers as a whole.”
The filing said T-Mobile “trails AT&T, Verizon Wireless and Sprint in market share, service revenue, and market capitalization -- in many cases by a significant margin.” MetroPCS, meanwhile, “even within its existing service areas … is spectrum-constrained, challenging its ability in the future to continue to meet growing customer demands for data services and making it impossible, absent significant cost and refarming, to deploy a 4G LTE network with the large blocks of spectrum necessary to match the speeds and capacity of its larger competitors,” the filing said.
T-Mobile and MetroPCS lack spectrum below 1 GHz, but have highly complimentary spectrum portfolios, they said. Combining spectrum holdings will help both compete, they said. “This will enable a broader and deeper roll-out of 4G LTE services than either company could readily achieve on its own, including at least 20 x 20 MHz LTE in many urban areas -- which allows for higher speeds and throughput rates as well as much greater capacity than deployments using narrower [channels].” The deal means the two carriers will be able to make more efficient use of the spectrum they already have, the filing said. “Because significant portions of the spectrum held by the Applicants are in adjacent bands in common local areas, the combined company also can make more efficient use of the combined spectrum by eliminating the guard bands between adjacent channels,” the filing said. “By retaining many of MetroPCS’ cell sites and virtually all of its Distributed Antenna Systems, Newco will experience additional capacity gains as well as improved in-building service."
The applicants stressed the combined company plans to retain MetroPCS’s brand and low-cost service offerings. “Because T-Mobile USA has an existing nationwide network infrastructure, the combined company will be positioned -- and indeed plans -- to establish MetroPCS-branded distribution in new cities where the population density would not otherwise justify the capital requirements of building a new stand-alone, greenfield network,” the filing said.
The companies said nothing in their application should raise regulatory concerns. “The proposed transaction involves well-qualified applicants and does not violate any specific provisions of the Communications Act, other applicable statutes, the Commission’s rules, or federal communications policy,” they said. “The proposed transaction not only does not give rise to any competitive harms, but affirmatively increases and promotes competition while bringing consumers a host of other public interest benefits. Accordingly, the Commission should move promptly to conduct its review and grant the Applications.”