FCC approves T-Mobile/MetroPCS merger

The FCC approved T-Mobile USA's proposed merger with MetroPCS (NYSE:PCS), putting the deal one step closer to completion. The transaction has received approval from the Department of Justice and must now be approved by MetroPCS' shareholders, who are set to vote on the deal April 12.

The FCC approved the deal at the bureau level--in this case at the Wireless Telecommunications Bureau and the International Bureau--and it did not go to a full vote from the five FCC commissioners. The Communications Workers of America, which is worried about job cuts related to the deal, had urged the FCC against such a move.

In its order, the FCC staff said the proposed deal is in the public interest. The FCC said that while the merger "raises horizontal competition issues because it would result in the combination of overlapping mobile wireless coverage and services in various markets, as well as the transfer of customers of two current competitors" to the new combined carrier, such concerns are outweighed by the benefits. The FCC said the benefits include expanded LTE deployments, "the expansion of the MetroPCS brand into new geographical markets, the development of a more robust, national network, improved quality of service and the strengthening of the fourth largest nationwide service providers' ability to compete in the mobile broadband services market."

"With today's approval, America's mobile market continues to strengthen, moving toward robust competition and revitalized competitors," FCC Chairman Julius Genachowski said in a statement. "We are seeing billions more in network investment, while the courts have upheld key FCC decisions to accelerate broadband build-out, promote competition, and benefit consumers, including our broadband data roaming and pole attachment rules. Today's action will benefit millions of American consumers and help the U.S maintain the global leadership in mobile it has regained in recent years."

The FCC notes that the deal would combine the carriers' AWS and PCS spectrum, as well as one lower 700 MHz license, in 248 Cellular Market Areas (CMAs) across the nation. If the deal is made official, in markets where the two carriers currently overlap, the combined entity would hold a maximum of 110 MHz of spectrum covering around 141 million people, or 46 percent of the population of the mainland United States. However, the FCC staff said this overlap would not harm wireless competition.

If the deal is consummated  the new carrier would have 42 million customers and still be the nation's No. 4 player. Further, T-Mobile and MetroPCS have said they will be able to deploy 2x20 MHz channels for LTE in 90 percent of the top 25 U.S. markets, which will allow the new carrier to more effectively compete against Verizon Wireless, (NYSE:VZ), AT&T Mobility (NYSE:T) and Sprint Nextel (NYSE:S).

"Both T-Mobile USA and MetroPCS have a history of being disruptive influences or 'mavericks,' and moreover, Newco (the combined carrier) would have an economic incentive to continue to play this role," the FCC's order notes. "As the smallest of the nationwide service providers, it would benefit less from coordination than its significant rivals (the three other nationwide service providers) and it can expand output relatively inexpensively."

MetroPCS shareholders have expressed concern over the proposed transaction, and MetroPCS and T-Mobile have been working to convince them to approve the deal.

"The FCC's approval marks another significant milestone in bringing our two companies together, and we appreciate the commission's timely approval. We look forward to completing the transaction and delivering the significant customer and stockholder benefits that this combination will make possible," T-Mobile CEO John Legere said in a statement. "Our combined company will have the products, spectrum, scale and resources to shake up this industry and deliver an entirely new wireless experience."

Not everyone was entirely pleased with how quickly the deal has sailed through the regulatory review process. The CWA, which has expressed repeated concern that the deal will lead to job losses, noted that T-Mobile said earlier this month in a filing with the FCC that it has no plans to move call centers offshore, or to reduce employment levels at those call centers. "We expect T-Mobile USA to keep its word that not only will the company grow and retain call center jobs here in the United States, but that it will do the same for network technician positions as well," the CWA said. "T-Mobile has now said publicly that the 'synergies model' they shared with the FCC assumes no layoffs, and we'll hold them to that."

Many public interest groups have hailed the merger as a victory for consumers. "We're glad the FCC has approved the merger of T-Mobile and MetroPCS," John Bergmayer, senior staff attorney at Public Knowledge, said in a statement. "To counter the power of AT&T and Verizon, the market needs more strong, national competitors, and this action will allow T-Mobile to improve its network and strengthen its position. The improved competitive landscape will benefit consumers."

For more:
- see this FCC order (PDF)
- see this T-Mobile release

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