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T-Mobile/MetroPCS Merger


marioc21
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The rumor mill is churning today. Bloomberg has a story on T-Mobile's parent company, Deutsche Telekom, acquiring MetroPCS. I didn't know metro's spectrum was compatible with anything T-Mo had. Interesting, rumors were that Sprint may have been in contention as well. We know they had a deal worked out with Metro earlier this year and it was squashed by Sprint's board. Does this make Leap a prime target for Sprint now?

 

http://www.bloomberg.com/news/2012-10-02/deutsche-telekom-said-to-near-deal-with-metropcs-in-u-s-.html

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I know that Sprint wanted to concetrate on Network Vision, but if this is true, then it is a major missed opportunity for Sprint. Not too much spectrum and customers in play out there.

 

I don't agree with this at all. Sprint is still pulling in customers. No need to take on an extra burden. Not to mention, I don't think this really creates many synergies with T-Mobile. They're gaining a CDMA network and prepay customers.

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Really? T-Mobile is a PCS 1900 MHz and AWS 2100+1700 MHz carrier, and MetroPCS is a PCS 1900 MHz and AWS 2100+1700 MHz carrier. So, there you go.

 

AJ

 

Well then it will be a good pick up for T-Mo as far as spectrum is concerned. The old Sprint/Metro deal had quite a high price tag however.

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Really? T-Mobile is a PCS 1900 MHz and AWS 2100+1700 MHz carrier, and MetroPCS is a PCS 1900 MHz and AWS 2100+1700 MHz carrier. So, there you go.

 

AJ

 

I'm not a spectrum expert. It gets too complicated. That's what you all are here for. lol. Thanks for the info. So this does make more sense for T-Mo to pick up than for Sprint.

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They're gaining a CDMA network and prepay customers.

 

I have said it before, and I will say it again. Do not pay to acquire non contract subs. They are not worth any premium. And their cheap, non contract plans are an albatross around the neck of any major carrier that acquires them. If you keep the cheap, non contract plans, you piss off your core contract subs, who then want the same cheap rates. Or if you discontinue the cheap, non contract plans, you piss off the subs you just acquired. The FCC may not even allow that in any merger consent agreement; if it does, the cheap, non contract subs you just paid billions to acquire may then leave for MVNOs.

 

AJ

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I have said it before, and I will say it again. Do not pay to acquire non contract subs. They are not worth any premium. And their cheap, non contract plans are an albatross around the neck of any major carrier that acquires them. If you keep the cheap, non contract plans, you piss off your core contract subs, who then want the same cheap rates. Or if you discontinue the cheap, non contract plans, you piss off the subs you just acquired. The FCC may not even allow that in any merger consent agreement; if it does, the cheap, non contract subs you just paid billions to acquire may then leave for MVNOs.

 

AJ

 

Excellent points. Gaining non-contract subs that can leave tomorrow isn't very wise.

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I have said it before, and I will say it again. Do not pay to acquire non contract subs. They are not worth any premium. And their cheap, non contract plans are an albatross around the neck of any major carrier that acquires them. If you keep the cheap, non contract plans, you piss off your core contract subs, who then want the same cheap rates. Or if you discontinue the cheap, non contract plans, you piss off the subs you just acquired. The FCC may not even allow that in any merger consent agreement; if it does, the cheap, non contract subs you just paid billions to acquire may then leave for MVNOs.

 

AJ

 

Well, yes, it depends on the premium they pay vs how much spectrum, how much spectrum is available in the market, PCS band H, Dish spectrum, etc.

 

If they acquire Metro and then increase prices to compensate for the price they paid to acquire them, then it could lead to people leaving for competitors. Or it lead to higher prices for all prepaid customers.

 

So Cricket it is.

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Well, yes, it depends on the premium they pay vs how much spectrum, how much spectrum is available in the market, PCS band H, Dish spectrum, etc.

 

If they acquire Metro and then increase prices to compensate for the price they paid to acquire them, then it could lead to people leaving for competitors. Or it lead to higher prices for all prepaid customers.

 

So Cricket it is.

I would agree to a point. They would be purchasing infrastructure(ie towers ) and spectrum to go along with the subs. Infrastructure is a fixed price point. Spectrum would have to be priced using the companies internal processes(ie what they think the market will presently hold). They should avoid paying a premium for subs that are mostly pre-paid. They can only increase prices on the former Metro subs to equal the present sprint prices. Raising prices on current customers in order to make the "math work" could be disastrous.
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I would agree to a point. They would be purchasing infrastructure(ie towers ) and spectrum to go along with the subs. Infrastructure is a fixed price point. Spectrum would have to be priced using the companies internal processes(ie what they think the market will presently hold). They should avoid paying a premium for subs that are mostly pre-paid. They can only increase prices on the former Metro subs to equal the present sprint prices. Raising prices on current customers in order to make the "math work" could be disastrous.

 

From what I understand, Cricket is in a precarious financial condition and could be acquired for $.5B and assumption of debt. Even some of that debt could be restructured.

There are costs associated with integrating a network, namely leases that are no longer needed. I don't think that Cricket has many of their own towers. They just lease on already existing towers.

The best thing for Sprint to do is to buy the spectrum and have Cricket become an MVNO. No need to buy the company.

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Look at it this way. As long as people do not act like heroin junkies addicted to wireless data, Sprint has ample spectrum in most markets because, in most markets, Sprint holds a full PCS A/B block 30 MHz license -- in addition to the PCS G block 10 MHz license that Sprint holds in all markets. Those PCS A/B 30 MHz markets are basically set. (And for sake of argument, this is leaving Clearwire BRS/EBS 2600 MHz spectrum completely out of the equation.)

 

The markets (e.g. Chicago, the Bay Area, Houston, Atlanta, Miami, Cleveland, Baltimore, Milwaukee, Memphis, etc.) in which Sprint has 20 MHz or even just 10 MHz of PCS A/B/C/D/E/F block spectrum are the only markets that are any cause for concern. Of those less than 30 MHz markets, acquiring MetroPCS would help Sprint boost its PCS holdings in only Florida, Atlanta, and the Bay Area.

 

Would those gains be worth the price for MetroPCS?

 

AJ

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Like it or not, Sprint will eventually follow suit. So the question is do they go after Metro's counterpart Leap and their 6 million or so prepaid subscribers? Alternatively, do they look at US Cellular and possibly C-Spire to enhance their postpaid subscriber base and their coverage outside of large metro, urban areas in a number of states. Interesting times ahead.

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freaking stock market, sprint is going down cause they aren't buying them, yet if they had been the ones that were they would have still been going down cause they would be spending money to do it.....

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From what I gather, the talks are at an advanced stage, but not yet finalized. Part of the deal is that the resulting entity will be listed in the US stock market. So it looks that T-Mobile USA will be merged and spun off.

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From what I gather, the talks are at an advanced stage, but not yet finalized. Part of the deal is that the resulting entity will be listed in the US stock market. So it looks that T-Mobile USA will be merged and spun off.

 

Good point, I saw that regarding T-Mobile owning a majority of the shares in the new company.

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So it looks that T-Mobile USA will be merged and spun off.

 

DT has been longing to do that since the at&t merger got shot down. And they get to pocket the $2.4B from T-Mobile USA for the Crown Castle deal to put towards their debt back home. A definite win for the Germans.

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If I was Sprint and this goes through, I would offer to let Metro customers bring over their Metro handsets for free and not require them to buy Sprint compatible handsets. Are there any Metro phones that don't roam on 1900PCS? The worst that can happen is to force T-Mobile to offer former MetroPCS customers free handsets, thereby making this merger even more expensive.

 

The impediment to Sprint buying/merging with anybody is that their stock is too low.

Edited by bigsnake49
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Good point, I saw that regarding T-Mobile owning a majority of the shares in the new company.

 

Ha. T-Mobile isn't "acquiring" MetroPCS; it's a path to exit for DT. They are using MetroPCS as a means of spinning off TMOB-USA and going public in the US with separate stock listing. "Mergers" are frought with integration complications and challenges and this one certainly will as well. TMOB can't get access to Metro's spectrum until you chase off the 10mm PCS subscribers onto GSM handsets (or maybe migrate to new VoLTE ones). The network integration has my head spinning, all the while when TMOB is supposedly re-farming its 1900mhz to deploy HSPA+ and building out LTE on AWS, and so let's throw in the integration/migration of Metro's network as well. Where have I seen this movie before.......

 

BTW, this does not preclude a subsequent TMOB/PCS merger with Sprint in 2014/2015 -- by that time TMOB/PCS will probably have lost the 10mm subs from PCS due to network integration.

 

IMO, Sprint needs Leap like a hole in the head and Leap's AWS spectrum is of minimal strategic value to Sprint (only islands of AWS coverage) other than perhaps to trade it to TMOB for some of its PCS1900 spectrum. In the meantime, Sprint can suck the economic life blood out of Leap via their existing MVNO agreement.

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