T-Mobile US and MetroPCS To Merge

Two smaller carriers will become a bit larger.

ByABC News
October 3, 2012, 9:21 AM

Oct. 3, 2012 — -- There's about to be one less carrier in the US.

T-Mobile US, which is owned by Deutsche Telekom in Germany, has announced that it will acquire MetroPCS, the fifth-largest mobile carrier in the U.S.

The companies will be combined under the T-Mobile name. According to the company, the deal will result in a more products and deeper network coverage, which will include plans for a bigger LTE network.

"The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate, especially around the next-generation LTE network," René Obermann, CEO of Deutsche Telekom, said in a statement.

Deutsche Telekom's board unanimously approved the deal. MetroPCS shareholders will receive $1.5 billion in cash and 26 percent ownership in the combined company.

In March 2011, AT&T made a move to acquire T-Mobile US, the fourth-largest carrier in the U.S., from Deutsche Telekom, but the deal was ultimately rejected by the Department of Justice because of antitrust issues.

"After AT&T's rejected acquisition of T-Mobile, this makes perfect sense, as T-Mobile could not structurally be on their own," market analyst Patrick Moorhead told ABC News. "The combined entity of T-Mobile and MetroPCS is good for both sides. T-Mobile brings 4G and LTE and MetroPCS brings a new large customer base."

T-Mobile has struggled to keep up with the other leading U.S. carriers, including Verizon, Sprint, and AT&T. While it offers 4G with its HSPA+ network, it doesn't have an LTE network at this point nor does it offer the iPhone. More recently it announced plans for its unlimited data plan and its progress in rolling out an LTE market by 2013.

MetroPCS has become the fifth largest U.S. carrier for the last number of years with its contract-free, unlimited plans.

The merger will still have to get regulatory and MetroPCS shareholder approval. It is expected to close in the first half of 2013.