Key benefits and challenges after the merger of T-Mobile USA and MetroPCS
Telecom Lead America: The merged entity of T-Mobile USA and MetroPCS is set to become a value leader for wireless customers in the U.S.
This achievement cannot be attributed to both AT&T and Verizon.
Value leader means a lot for American customers who want more choice.
The combined company is expected to have approximately 42.5 million subscribers, $24.8 billion of revenue, $6.3 billion of adjusted EBITDA, $4.2 billion of capital expenditures and $2.1 billion of free cash flow (defined as EBITDA less capital expenditures) in 2012.
Capital expenditure will be a big news for telecom suppliers.
“The combination with MetroPCS is another logical and significant step that will accelerate our Challenger Strategy and enable us to deliver amazing, affordable and trusted 4G services, while providing opportunities to expand geographic territories and serve more customers,” said John Legere, president and CEO of T-Mobile.
Without MetroPCS’ spectrum, T-Mobile USA would have suffered a lot though its LTE strategies could pave way for future growth.
The merger, which has been approved by both companies, accelerates T-Mobile’s Challenger Strategy with increased scale, spectrum and financial resources.
Analysts are questioning about the valuation of the merger deal. The merger enables MetroPCS shareholders to receive $1.5 billion in cash and 26 percent ownership in combined entity.
Deutsche Telekom will have 74 percent stake in the merged entity. MetroPCS will disappear after some time since the merged entity will use T-Mobile brand name.
Meanwhile, Deutsche Telekom agreed to roll its existing intercompany debt into new $15 billion senior unsecured notes of the combined company, provide the combined company with a $500 million unsecured revolving credit facility and provide a $5.5 billion backstop commitment for certain MetroPCS third-party financing transactions.
“We are extremely pleased to announce this transaction with MetroPCS, which enhances Deutsche Telekom’s position in the expanding U.S. wireless market,” said Rene Obermann, chief executive officer of Deutsche Telekom.
Existing MetroPCS customers will be migrated to a common LTE-based network as they upgrade their handsets.
Both the companies are projecting approximately $6-7 billion (net present value) of cost synergies and additional upside from revenue synergies.