The merger between T-Mobile and MetroPCS passes another hurdle

April 24, 2013

The merger between T-Mobile and MetroPCS passes another hurdleMetroPCS shareholders approved its merger with T-Mobile after Deutsche Telekom, T-Mobile’s parent company offered a sweeter loan deal. The merger of the fourth and fifth mobile phone carriers in the US will offer more competition with Verizon and AT&T and more choice for consumers.

Bloomberg announced MetroPCS shareholder approval for the merger with T-Mobile earlier today.  Apparently, Deutsche Telekom decided to lower the interest rate and amount of the loan it will be making to the joint company. Rather than the $15 billion it was originally going to loan the company it agreed to a more modest $11.2 billion loan. The larger the loan, the higher the debt load and the lower the equity for MetroPCS shareholders which is why the decrease persuaded the shareholders. The company also shaved 1/2 percentage point off of the interest rate.  With those two concessions MetroPCS shareholders voted to approve the merger.

Deutsche Telekom will have a 74 percent interest in the new company and has agreed to not sell any shares for 18 months. MetroPCS shareholders will get a $1.5 billion cash payment. Customers gain access to a faster network.

T-Mobile has lost customers over the last four years and is hoping that this merger will stem that loss. Deutsche Telekom had been looking for someway of salvaging T-Mobile and had tried several different avenues before settling on the merger with MetroPCS. At one point T-Mobile was almost sold to AT&T but the deal fell through.

T-Mobile Chief Executive Officer John Legere sees the merger as way to continue to alter the current mobile carrier business model.  The company has already announced that it has eliminated contracts and is looking forward to other changes now that the deal has been approved. One of the major changes that will help draw in customers, is that the company now offers the iPhone along with popular Android phones like the Samsung Galaxy S4 and HTC One. 

According to Phandroid although the companies will be merging, MetroPCS will still do business as a separate entity for a while longer.  Part of that is to avoid issues with regulators. According to DroidLife the merger will take place next week on the first of May.

T-Mobile is looking better and better all the time.  Let’s see if the merger makes the big difference the company needs to remain viable.

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