MetroPCS Communications, Inc. (NYSE:PCS) and Deutsche Telekom (XETRA:DTE) have announced that they have signed a definitive agreement to combine Deutsche Telekom’s subsidiary T-Mobile USA and MetroPCS. MetroPCS shareholders will receive $1.5 billion in cash and 26% ownership in the combined company, which will go by the T-Mobile name.
T-Mobile and MetroPCS are now the nation’s 4th and 5th largest cellphone companies. Even together they will still be smaller than number 3 Sprint, but the companies say that with increased scale they will be able to offer a wider range of products and services, along with increased network coverage.
Many people have pointed out that MetroPCS and T-Mobile USA use different network technologies, which means that currently their users’ phones will not work on each other’s networks. However, both companies are moving towards the same 4G LTE technology so they’re on the path harmonizing their networks.
The hope is that the increased size of the combined companies will make them more competitive as a group. Last year T-Mobile, which has been losing customers, attempted to solve its size problem by agreeing to an acquisition by AT&T. However, the deal was quashed by regulators on anti-trust grounds. Most expect that this deal will not suffer a similar fate.