T-Mobile and MetroPCS to Merge and Challenge Big Boys

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Posted 5 years ago

In the latter part of 2011, Deutsche Telecom tried and failed to sell off its T-Mobile USA to rivals AT&T, less than 12 months on and the German company has gone down a completely different route by merging with MetroPCS.

The fourth and fifth largest wireless carriers respectively in the US will merge with the aim of taking on the likes of AT&T, Verizon and Sprint, aiming to beat them on value. The combined company will be known as T-Mobile, and Deutsche Telecom will own 74 per cent to MetroPCS’s 26 per cent. As well as the quarter share in the company, shareholders of MetroPCS will receive a $1.5bn cash windfall.

In a video statement, CEO of T-Mobile John Legere said, “This is not a deal to survive, it’s a deal to thrive,” adding, “It’s an aggressive plan to accelerate our return to market leadership,” fighting talk if ever I’ve heard it.

The merger will certainly give the combined company enough of a footprint to move ahead of Sprint – the third largest carrier in the US. With nine million customers, MetroPCS will bring the total amount of subscribers between the two up to 42.5 million, surpassing the 33 million people currently using Sprint; however, these numbers will still be way off AT&T and Verizon.

With unlimited data and strong pre-paid offerings, the new T-Mobile USA can expect to feature more prominently in the market, although, as reported today by Reuters, the new merger will have certain technology problems to overcome if they want to seriously get amongst the big players.

“But as their [T-Mobile and MetroPCS] networks are incompatible, they will have to convince MetroPCS customers to move to T-Mobile’s network with the aim of shutting down the MetroPCS network by the end of 2015,” says the Reuters article, “And T-Mobile USA has to upgrade its network with high-speed services to catch up to bigger competitors.”

If the deal goes through, customers will not see any changes until 2013 when the two companies fully merge. We have already seen a failed deal when AT&T’s attempted takeover of T-Mobile USA collapsed due to concerns by the U.S. Department of Justice; however, given that T-Mobile and MetroPCS are way down the pecking order of carriers, the deal does seem likely to get the go-ahead.

– Anthony Carter

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