T-Mobile in talks with MetroPCS?
Deutsche Telekom would prefer to sell its US unit outright but may settle for a joint venture with the regional carrier, say sources
Published: 10 May, 2012
READ MORE: M&A | US | T-Mobile USA | Infrastructure | LTE
T-Mobile USA may be talking up its ambitious plans for spectrum refarming and LTE build-out, but it is hardly a secret that its parent Deutsche Telekom would still prefer to offload the unit, despite the failure of the plan to sell to AT&T last year. The latest option is a joint venture with MetroPCS, according to sources.
The German giant is reviewing various options for its US subsidiary and is in discussions with the prepaid regional carrier, according to "people familiar with the matter" who spoke to Bloomberg. They indicated that DT is considering a stock-swap transaction in which it would retain control of a publicly listed joint venture. Other options under review include an IPO or an outright sale, the latter being the preferred route, according to various insiders, though there is no obvious candidate to take on the unit following the blocking of AT&T's bid.
At least a merger with MetroPCS would bring T-Mobile, which is losing customers despite its heavy investment in HSPA+ upgrades, greater scale, and would consolidate the prepaid sector, where TMo increasingly sees its growth. The CDMA player also made an early move into LTE, but would benefit from the greater spectrum capacity a TMo deal would bring as its own 4G network is heavily constrained in performance terms.
"The thing they lack is size and it would be easier to be part of something larger," Alexandre Iatrides, an analyst at Oddo & Cie, told Bloomberg. He added that combining with a smaller player "isn't really the option they prefer, but they don't really have a choice", with Sprint - which has financial pressures and a hugely complex 4G plan of its own - the only viable takeover option. Sprint was reported to have considered a bid for TMo before AT&T stepped in last year, and it also abandoned plans to buy MetroPCS early this year.
The current negotiations with Deutsche Telekom are complicated by a 24% decline in MetroPCS shares this year before today, Bloomberg pointed out, and the CDMA carrier is also thought to be in discussions with other potential partners.
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