German incumbent Deutsche Telekom is in talks to merge its US telco T-Mobile USA with US wireless operator MetroPCS, according to media reports. The potential deal would see Deutsche Telekom take control of the new entity by executing a stock swap…
German incumbent Deutsche Telekom is in talks to merge its US telco T-Mobile USA with US wireless operator MetroPCS, according to media reports.
The potential deal would see Deutsche Telekom take control of the new entity by executing a stock swap transaction, and the company would then be floated, Bloomberg wrote, with reference to unnamed people familiar with the matter. The Financial Times carried a similar report, also citing people familiar with the matter, noting that no deal has been struck at this stage.
Alternative scenarios for T-Mobile USA include an IPO or sale of the US operations, Bloomberg said.
Bernstein Research commented that a merger of T-Mobile USA and MetroPCS would solve neither telco’s spectrum woes, nor are their respective technologies compatible. It would take years for the companies to integrate. However, a deal may be attractive to both companies from a financial engineering point of view.
A note from Credit Suisse suggested that the move may trigger a bid from Sprint for PCS because of the similarities between the operators, with the analyst estimating US$10bn in synergies from a Sprint/PCS merger.
Bernstein described an IPO of T-Mobile USA as a more likely scenario.
