T-Mobile USA executives said the carrier's plan to merge with MetroPCS (NYSE:PCS) is primarily an attempt to generate savings by combining the carriers' LTE, CDMA and HSPA networks. Specifically, T-Mobile plans to merge MetroPCS' existing LTE network into its own planned LTE network and to refarm MetroPCS' 1900 MHz CDMA spectrum for HSPA+ services.
The result, T-Mobile said, will create a network that is cheaper to maintain and offers more capacity to subscribers. Indeed, T-Mobile said it expects around $6 billion to $7 billion of "cost synergies and additional upside from revenue synergies" if the deal is approved.
"Together, the combined entity will be able to leverage a faster, stronger and more reliable network to provide amazing 4G services," T-Mobile CEO John Legere said. "We'll have unsurpassed speed and reliability through a denser, higher-capacity network and deeper LTE coverage in key metropolitan areas such as New York, Los Angeles and Dallas. We'll have greater network coverage and a path to at least 20x20 MHz of LTE in many areas." T-Mobile had previously said it would offer 10x10 MHz LTE.
Though T-Mobile predicts synergies though the deal, the effort is complicated. T-Mobile currently operates an HSPA network, while MetroPCS operates LTE and CDMA networks. T-Mobile's merger plan involves moving all of MetroPCS' CDMA customers off that network and onto a combined LTE network from MetroPCS; T-Mobile that would run on AWS spectrum. T-Mobile said it expects all of MetroPCS' customers to be moved onto the new, combined network by 2015 (which T-Mobile said would be aided by MetroPCS' 60-65 percent handset turnover rate).
Interestingly, T-Mobile said it will leave its GSM network up and running for roaming, M2M and legacy devices.
"This all adds up to a hugely complex and challenging migration that will take significant time and investment and which is a major risk for derailing the benefits of the deal," wrote Informa analyst Mike Roberts, in a blog post.
The combined T-Mobile and MetroPCS would have 76 MHz of total spectrum in the top 25 major metro areas. The combined companies would count 60,000 cell sites and distributed antenna network nodes, resulting in around 765 subscribers per cell site. T-Mobile said it will consolidate MetroPCS' network in certain areas by decommissioning unneeded sites.
MetroPCS launched its LTE network in 2010 (the carrier essentially skipped an upgrade to 3G network technology by moving from CDMA 1X to LTE). The carrier has since been working to move its CDMA customers onto its more efficient LTE network.
T-Mobile, meanwhile, recently announced a $4 billion network upgrade plan where it plans to launch LTE services on its AWS spectrum next year and refarm its 1900 MHz spectrum for HSPA services.
T-Mobile's plan to merge its network with the network of MetroPCS could result in a windfall for T-Mobile's current network upgrade vendors, Ericsson and Nokia Siemens Networks. T-Mobile previously selected the two companies for its $4 billion network upgrade plan, and Ericsson and NSN could also be called on to aid with the integration of T-Mobile and MetroPCS' networks.
- see this release
- see this Informa post
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