UPDATED: Deutsche Telekom confirms T-Mobile/MetroPCS negotiations
Deutsche Telekom is close to a deal to merge its T-Mobile USA operations with flat-rate player MetroPCS (NYSE:PCS), according to a Bloomberg report.
The report, which cited unnamed sources, said that Deutsche Telekom's board is scheduled to meet in Bonn tomorrow to approve the deal, which may be announced as soon as tomorrow. The report did not provide any other details on the proposed transaction. Reuters reported that a deal was close at hand, also citing unnamed sources.
"Deutsche Telekom is holding talks with the listed company MetroPCS with the aim of operating its subsidiary T-Mobile USA and MetroPCS within one company in which Deutsche Telekom would hold the majority of shares," DT confirmed on its website. "The talks are at a stage where significant issues have not yet been finalized, contracts have not yet been signed and the conclusion of the transaction is still not certain."
MetroPCS separately also confirmed the talks: "MetroPCS today confirmed that it is in discussions with Deutsche Telekom regarding an agreement to combine T-Mobile USA and MetroPCS," the company said. "There can be no assurances that any transaction will result from these discussions, and the Company does not intend to comment further unless and until an agreement is reached."
This is not the first time that DT and MetroPCS have been rumored to be part of a tie-up. A report last week from DealReporter indicated that MetroPCS was talking with T-Mobile , Dish Network and Sprint Nextel (NYSE:S) about possible mergers. In May, Bloomberg reported that DT was interested in merging T-Mobile with MetroPCS. That report said DT was considering a stock-swap transaction that would give it control over the combined entity, which would be publicly listed.
A merger between T-Mobile and MetroPCS would be complicated. Though they both use AWS spectrum, MetroPCS is a CDMA carrier while T-Mobile uses GSM technologies. MetroPCS has launched LTE service and has close to one million LTE subscribers. T-Mobile plans to deploy LTE on its 1700 MHz AWS spectrum next year.
Deutsche Telekom CEO Rene Obermann said earlier this year that it's unlikely DT will try to sell T-Mobile again after AT&T's (NYSE:T) $39 billion acquisition of T-Mobile fell apart in late 2011. However, he has left open the possibility of other kinds of partnerships to grow DT's U.S. business.
In an August interview with FierceWireless, MetroPCS COO Tom Keys said that the time is ripe for some kind of industry consolidation.
"It would probably be a better time to do it now than any other time you can think of in the recent past," he said. "Now, how, who, why, where and what--that's going to be up for debate. But at the end of the day, I think what you've seen with the AT&T/T-Mobile deal is that there's at least two companies that thought that consolidation was a good thing. So if you take that as a precursor, yes--[but] under the desire that we always a provide a good experience for the consumer and the consumer doesn't get harmed by having artificially higher rates because you have one less competitor."
T-Mobile had 33.2 million customers at the end of the second quarter and MetroPCS had 9.3 million. T-Mobile has suffered recently from postpaid subscriber defections but is trying to turn that around by offering a new, unlimited smartphone plan and making its network more friendly to customers using Apple's (NASDAQ:AAPL) iPhone by refarming its 1900 MHz PCS spectrum to run HSPA+ service.
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Article updated Oct. 2 with confirmation from Deutsche Telekom and MetroPCS.