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Deutsche Telekom Tries To Save T-Mobile, MetroPCS Merger

Richardson, Texas — Regional carrier MetroPCS postponed a shareholder vote on its planned merger with T-Mobile USA to give its shareholders time to digest a sweetened offer from T-Mobile parent Deutsche Telekom.

 The vote was rescheduled from this Friday to April 24.

To counter rising opposition from MetroPCS shareholders, Deutsche Telekom altered its original October 2012 proposal ways that it says “significantly” increase the equity value of the combined company.
 Deutsche Telekom promotes the merger as a way of “establishing a new, stronger competitor in the U.S. mobile communications market that will offer customers a greater selection of attractively priced products and services on a best-in-class wireless network.” The resulting economies of scale will enable the merged carriers “to compete more aggressively with other U.S. mobile operators,” free up financial resources through cost savings of $6 billion to $7 billion, and provide T-Mobile with additional spectrum to handle future data growth.

Under the revised proposal, Deutsche Telekom will reduce the amount of loans that the combined entity’s shareholders would be required to take from Deutsch Telekom to $11.2 billion from $15 billion. Deutsch Telekom will also reduce the interest rate on the loans by 50 basis points.

The revised proposal still envision a $1.5 billion cash payment to existing MetroPCS shareholders, and current MetroPCS shareholders would still own 26 percent of the shares of the combined company, with the rest owned by Deutsch Telekom.

The amended offer does not change a proposed business plan in which the combined company will be named T-Mobile, the T-Mobile and MetroPCS brands will be retained, and MetroPCS will be operated as a separate unit. As a result, the new entity will introduce MetroPCS no-contract plans and services to a larger number of areas to complement T-Mobile’s offerings, the companies have said.

Several analysts agreed that the merged companies will be in a better position to compete.

The merger would combine T-Mobile, the nation’s fourth-largest carrier by subscribers, with the nation’s fifth-largest carrier, MetroPCS, which operates a network in only 14 major metropolitan areas, though though MetroPCS’s subscribers can roam at no extra cost in markets with a population of 280 million people.