MetroPCS (NYSE:PCS) and Deutsche Telekom's T-Mobile USA formally asked the FCC to approve T-Mobile's effective acquisition of MetroPCS, setting the wheels in motion for regulators to start their review of the deal.
The companies submitted their arguments for approval of the deal to the FCC on Oct. 18, according to Bloomberg, which obtained the filing. T-Mobile and MetroPCS said the deal does not harm competition and will strengthen the nation's No. 4 carrier. Analysts expect regulators to approve the deal--which would represent a reversal of AT&T's (NYSE:T) attempt to purchase T-Mobile last year in a $39 billion deal that was blocked by regulators.
Bloomberg reported T-Mobile and MetroPCS will file with the Department of Justice for approval at a later date; the agency also must approve the transaction.
Deutsche Telekom expects T-Mobile's acquisition of MetroPCS to close in the second quarter of next year, according to a senior DT executive. DT CFO Timotheus Höettges said the deal will close no sooner than the second quarter of 2013, according to an interview he gave earlier this month with the German newspaper Boersenzeitung.
The transaction is structured as a recapitalization, in which MetroPCS will declare a 1 for 2 reverse stock split, make a cash payment of $1.5 billion to its shareholders and acquire all of T-Mobile's capital stock by issuing to Deutsche Telekom 74 percent of MetroPCS' common stock on a pro forma basis. DT also will roll its existing intercompany debt into new $15 billion senior unsecured notes of the combined company, thereby providing the combined company with a $500 million unsecured revolving credit facility and a $5.5 billion backstop commitment. The post-merger company will operate under the T-Mobile brand under the leadership of current T-Mobile CEO John Legere. It will serve 42.5 million U.S. subscribers and projects 2012 pro forma revenues of $24.8 billion.
A key issue for the FCC will be how to evaluate the AWS spectrum holdings T-Mobile will acquire if it gains control of MetroPCS. The deal will give T-Mobile enough AWS spectrum to launch LTE on 20x20 MHz channels in some markets. T-Mobile had previously said it would offer 10x10 MHz LTE.
Further complicating T-Mobile's merger with MetroPCS is the FCC's plan to re-evaluate how much spectrum a carrier should be able to hold. The FCC's rulemaking will explore the agency's so-called spectrum-screen, which it uses when reviewing spectrum transactions. If a carrier acquires too much spectrum and violates the screen, the deal is more closely scrutinized. Currently, the screen is different for each proposed transaction. It's unclear whether the FCC will have completed its review of the spectrum screen in time to apply it to T-Mobile's merger with MetroPCS.
- see this Bloomberg article
- see this FCC filing
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