T-Mobile and MetroPCS, the nation's fourth- and fifth-largest carriers, respectively, are discussing a merger, Bloomberg reported May 10, citing people familiar with the matter. The deal could entail an outright sale of T-Mobile or a stock swap that would give T-Mobile parent company Deutsche Telekom control over the combined carriers.
The news follows T-Mobile's May 9 announcement of its first-quarter performance, during which it out-performed analyst expectations though still lost more than half a million contract customers. It added 187,000 subscribers during the quarter still nearly double its performance during 2011's first quarter.
T-Mobile is, notably, the only top-four carrier without an iPhone--the device that Sprint CEO Dan Hesse has called the number one reason that customers "churn," or switch networks--though it is widely expected to reach an agreement with Apple for the next version of the iPhone, which, again, is widely expected to support Long-Term Evolution (LTE) technology.
Since receiving a chunk of spectrum and approximately $4 billion from AT&T -- a consolation prize of sorts, for the larger carrier's failed bid to acquire T-Mobile -- T-Mobile's prospects have brightened considerably. In February it announced a major "network modernization and 4G evolution effort" with its new spectrum and capital, and on May 7 it announced the signing of multi-year agreements with Ericsson and Nokia Siemens Networks, which will provide necessary equipment for the build-out.
Still, Deutsche Telekom, Bloomberg reports, "wants to bolster T-Mobile's ability to gain size and customers," which the deal would accomplish. What it wouldn't do is relieve either side of its need for spectrum.
The report added that while the U.S. Justice Department ultimately sued to stop AT&T's acquisition of T-Mobile, it's far more likely to approve of a merger between these smaller players.
Logistically, a combination of the AT&T and T-Mobile networks would have been a smoother one, as the two are both based on GSM technology. MetroPCS, however, is built on CDMA (code-division multiple access). Combing the two would be a mess until, potentially, the two could meet up on LTE networks.
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