The Federal Communications Commission gave its stamp of approval for T-Mobile USA’s merger with MetroPCS that will see the nation’s No. 4 and No. 5 carriers combine operations into a stronger, though still No. 4, competitor.
The deal, which was announced last October, is being conducted as a “reverse merger” that will see T-Mobile USA’s parent company Deutsche Telekom reduce its control in the new entity to 74%. In return, MetroPCS shareholders will receive about $1.5 billion in cash and remaining control in the company. When the deal was announced, the companies indicated that both brands would likely continue to be offered with recently named T-Mobile USA CEO John Legere continuing as CEO of the new company, current T-Mobile USA COO Jim Alling set to run the T-Mobile USA part of the business and current MetroPCS COO Thomas Keys set to run the MetroPCS side. The future of current MetroPCS CEO Roger Linquist was not revealed.
More importantly, the combined companies will sport a stronger spectrum portfolio that T-Mobile USA said would allow the carrier to throw 40 megahertz of spectrum into its ongoing LTE network rollout. MetroPCS has rolled out LTE services across its markets, though that network is limited to just a handful of megahertz in some of those locations.
MetroPCS reported late last year that it could decommission up to 10,000 of its 11,500 total cell sites as part of the T-Mobile USA deal. That move would be possible as the carrier moved traffic over to an LTE network it would share with T-Mobile USA.
The FCC cited the LTE benefits in approving the deal.
“Such benefits include the facilitation of [LTE] deployment, the expansion of the MetroPCS brand into new geographical markets, the development of a more robust, national network, improved quality of service, and the strengthening of the fourth largest nationwide service provider’s ability to compete in the mobile broadband services market,” the FCC wrote. “In summary, we find that any potential public interest harms would be outweighed by the resulting public interest benefits and we conclude that, on balance, the transaction is in the public interest.”
Analysts did note that the FCC took the unusual step of approving the deal through delegated authority of the agency’s Wireless Telecommunications Bureau and International Bureau, something that could be linked to concerns regarding foreign ownership rules tied to Deutsche Telekom.
“One possibility is the FCC handled [the deal] in this manner because the Committee on Foreign Investment in the United States (CFIUS), the inter-agency unit that examines foreign ownership-related transactions for national security implications, may not have completed its review and may not necessarily do so in time for the companies to close in mid-April,” noted Jeff Silva, senior policy director of telecommunications, media and technology at Medley Global Advisors.
Silva did add that he did not expect any complications from a CFIUS review, and that by approving the deal the administration is moving forward with attempting to bolster stronger competitors against larger carriers Verizon Wireless and AT&T Mobility. This notion is likely to be tested by AT&T’s current attempt to acquire 700 MHz spectrum assets from Verizon Wireless.
Both operators posted rough fourth quarter results as they scramble to find a competitive position in the wireless space. Prepaid services are the hallmark of MetroPCS’ unlimited service offerings, while T-Mobile USA is increasingly turning towards no-contract rate plans in order to attract customers.
Opponents of the deal included a number of labor groups that decried the potential job cuts that could come along with the merged entities. The Communications Workers of America has repeatedly claimed that the deal could result in the loss of 10,000 U.S. jobs. Prior to announcing the deal, T-Mobile USA announced last year plans to shut seven call centers, impacting approximately 1,900 jobs. That move came after AT&T’s attempt to acquire T-Mobile USA for $39 billion was denied by government regulators, a deal that was supported by the CWA. T-Mobile USA did note that it was in the process of adding up to 1,000 sales positions to pursue the enterprise market.
The deal, however, is not a done deal. MetroPCS’ stockholders still need to approve the transaction during a vote scheduled for April 12.
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