What the T-Mobile/MetroPCS Merger Means for Cost-Conscious Consumers

By Abby Ellin

Oct 5, 2012 7:00am
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                                             Image credit: Jin Lee/Bloomberg via Getty Images

On Wednesday, Deutsche Telekom, the parent company of T-Mobile USA, struck an agreement with MetroPCS, which provides no-contract cell phones and low-rate, prepaid plans with unlimited talk, text and Web options for a mere $40 a month.

While the new company will keep the T-Mobile moniker, MetroPCS and T-Mobile will continue to operate as separate customer units: T-Mobile will be responsible for contract-based mobile service (along with services for businesses), while pre-paid and non-contract service will be available under both brands.

Currently, T-Mobile is the nation’s fourth-largest wireless carrier after Sprint, AT&T and Verizon; MetroPCS is the fifth.  The new T-Mobile will be a public company with about 42.5 million subscribers and $24.8 billion in revenue.

“We are extremely pleased to announce this transaction with MetroPCS, which enhances Deutsche Telekom’s position in the expanding U.S. wireless market,” René Obermann, chief executive officer of Deutsche Telekom, said in a statement.

But what does the transaction, which is expected to close in the first half of 2013, mean for you, the consumer?

On the one hand, it’s good, “because the merger will increase competition in the prepaid market and consumers are likely to see more attractive price plans as well more attractive handsets, given that prepaid is now almost 30 percent of the market,” Chetan Sharma, president of Chetan Sharma Consulting, told ABC News.

Will Power, a senior analyst at RW Baird, agreed.

“The merger is designed to provide MetroPCS with the financial and spectrum resources to roll out its product offering in additional markets, which should benefit consumers in the form of greater choice,” he told ABC News.

According to the Wall Street Journal, both networks will keep running until the end of 2015, when the MetroPCS network will be shut down. That means MetroPCS consumers won’t have to rush out and get a new phone any time soon. And when customers do have to buy a new phone, they will be automatically moved over to T-Mobile’s network.

But the best news is that cell phone prices across the board may actually drop.

“This merger between T-Mobile and Metro PCS is going to make the field more competitive for larger service providers, specifically AT&T and Verizon,” Bartees Cox, a communications associate at Public Knowledge, a technology and IP policy public interest group in Washington, D.C., told ABC News. “Whenever there’s more competition we usually see prices drop, which is great in the public interest. If T-Mobile continues to offer an unlimited data plan, it’s going to make it really hard for Verizon or AT&T to compete.”

On the downside, customer service might not change at all, which may not be such a good thing. In Consumer Reports’ phone-carrier ratings poll,  T-Mobile rated lower than most other cell phone carriers for reader satisfaction in contract service.  MetroPCS was among the lower-scoring prepaid carriers.

J.D. Power and Associates rated T-Mobile the lowest for customer service among all carriers.

Ultimately, only time will tell, as Craig Moffett, a senior analyst at Bernstein Research, noted.

“A stronger T-Mobile would provide a healthy counterbalance to Verizon and AT&T, something that would be good for consumers over the long term,” he told ABC News. “But in the short term, it would mean losing MetroPCS as an independent player, and they’ve been among the most aggressively priced competitors in the market.”

But you never know what may happen.

“This story might not be over yet,” said Moffett. “Sprint could still step in and try to acquire MetroPCS for themselves.”

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