The parent company of T-Mobile agreed to buy MetroPCS on Wednesday, as the cellphone providers look to compete with bigger rivals.
The merger is aimed at making T-Mobile a more robust competitor to Sprint Nextel, particularly in low-cost cellphone service. The deal will also help T-Mobile gain more customers and resources to build out a next-generation data network.
Under the terms of the complex transaction, MetroPCS will conduct a 1-for-2 reverse stock split and pay out $1.5 billion in cash to its existing shareholders, or about $4.09 a share. It will then issue new stock worth about 74 percent to T-Mobile’s parent, Deutsche Telekom, leaving existing MetroPCS investors with a 26 percent stake.
“The T-Mobile and MetroPCS brands are a great strategic fit – both operationally and culturally,” René Obermann, the chief executive of Deutsche Telekom, said in a statement. “The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate.”
The cellphone carrier is bulking up in the face of increased competition. The combined company, which will be named T-Mobile, will have nearly $25 billion in revenues and $6.3 billion in profits. T-Mobile expects to wring out $6 billion to $7 billion in cost savings.
More importantly, T-Mobile will add to its customer base. With 42.5 million users, the combined company will significantly close the gap with Sprint, the No. 3 player with 56.4 million customers.
Morgan Stanley advised Deutsche Telekom’s board, while Lazard advised the German telecom’s management team. Legal advice was provided by Wachtell, Lipton, Rosen & Katz, Cleary Gottlieb Steen & Hamilton, K&L Gates, and Wiley Rein.
MetroPCS was advised by JPMorgan Chase, Credit Suisse and the law firms Gibson, Dunn & Crutcher, Paul Hastings and Telecommunications Law Professionals. A special committee of its board was advised by Evercore Partners and the law firms Akin Gump and Fulbright & Jaworski.
