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T-Mobile/MetroPCS Merger


marioc21

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From what I can gather, the combined company would have about $20.5B worth of debt. DT must have used the combined proceeds of both the AT&T failed merger and the proceeds from the sale of towers to CrownCastle to write down T-Mobile USA's debt.

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" Combining T-Mobile and MetroPCS’ complementary spectrum to provide greater network coverage, deeper LTE network deployment and a path to at least 20x20 MHz of 4G LTE in many areas. Existing MetroPCS customers will be migrated to a common LTE-based network as they upgrade their handsets"

 

Why does a MetroPCS customer have to upgrade a handset? There is no incentive to do so unless you lose yours. This really sounds like a mess for T-Mobile. I'm sure Sprint and other carriers have numbers on how often a customer upgrades their phones, but I can't imagine that MetroPCS customers come close while paying full price for top of the line handsets.

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USCC is indeed public. They trade under the ticker USM. Their current market cap is ~3.30B and their enterprise value is ~3.74B.

 

Yep, i was wrong.

 

Cspire would also only net roughly 1 million or less customers, hardly worth parting with cash for right now.

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Are most of C-Spire's customers postpaid? If so, ~1M postpaid subscribers are probably with triple that amount in prepaid subscribers. Couple that with their reputation for network coverage in the areas that they do serve and I'd say that it's at least worth looking at. Ditto for USCC.

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Conference call transcript here: http://allthingsd.com/20121003/live-deutsche-telekom-metropcs-discuss-merger-plans/?reflink=ATD_yahoo_ticker

 

Some interesting things...

 

T-Mobile uses GSM technology, while Metro PCS uses CDMA–the technology used by Verizon and Sprint.

Legere noted this has been a concern.

“People think the integration will be difficult,” he said. But no, Legere insists.

“This is not a replay of a debacle that people have seen in the past,” he said. “We will not smash together two networks with differing technologies.”

 

Clear shot at Sprint-Nextel merger :lol:

 

The company is hoping for a debt rating of BB to BB- (I’m no bond expert. I think that means it can get into a decent state school.)

Total debt for the combined company is projected to be 20.4 billion, with cash of $1.8 billion.

 

Similar debt load to Sprint, but with far less cash. I wonder if the analysts will be just as harsh towards the new company...

 

Legere said that the company will have a better LTE experience than rivals eventually, something it couldn’t always say. So much so that he said at some point in time it expects to be able to “taunt” rivals over the experience.

Legere said LTE network will be a “smoking differentiator” between T-mobile and its competitors.

 

Interesting to see if they will be able to back up these claims.

 

Still no iPhone on the horizon it would seem according to Legere's comments. Will be very fascinating to see if they can pull everything off as seamlessly as they're predicting.

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DT will be getting $2.4B in tower proceeds that has not closed yet but which will be distributed to DT, just like $1.5B cash that is being distributed to MetroPCS shareholders. Essentially they are combining their houses and levering up with home equity loans and taking out $3.9B cash distribution. In addition, DT will pull out $1.2B a year by virtue of holding $15B of notes from Newco -- I would expect DT to periodically sell these notes into the debt markets to turn that principal amount into cash. Counting the prior break-up fee that was distributed to DT plus tower proceeds, and the gradual monetization of the $15B in notes, plus interim interest thereon, DT will take out $20B+ back to Germany (more monies to help buy vacation spots in Greece?).

 

DT then will retain another $10.5B in equity of NewCo (if you take MetroPCS' current $5B market cap adjust for $1.5B to be distributed, so with $3.5B pro forma equity market cap for MetroPCS, and DT's pro forma ownership would be 3x Metro's shareholders ownership interest -- thus approximately $10.5B at current prices for MetroPCS stock which will be the new shares for this NewCo). So this deal is $8.5B lower than what AT&T's offer of $39B in cash was, but still about $5.5B higher than the $25B valuation that was rumored to be the deal that Sprint was discussing pre-AT&T link-up.

 

What's also interesting is the claim of 20x20 LTE in major markets at AWS freq (although not clear when this happens since they don't expect to shut down Metro's CDMA network until end of 2015), and the fact that they will overlay DT's own version of Network Vision over 37K cell sites (tower-top radios, better backhaul, etc). They are simply following Sprint but 2 years behind. They should be positioned for iPhone 5S (or 6) in late 2013 after the merger closes when DT will have refarmed 1900 for HSPA+ and deployed LTE on AWS (200 million pops).

 

Then the last major deal in this industry will be the merger of NewCo with Sprint to form a more formidable #3 in 2014/2015..... that's what my crystal ball says... :-)

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What is really interesting to me is that of the 4 major companies, none is rushing to retire their legacy voice networks. Metro was the only one that wanted to go full blast at VOLTE. The rest are taking a very cautious approach to voice. Knowing what we know about LTE coverage vs 1x and EVDO, I don't blame them.

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DT will be getting $2.4B in tower proceeds that has not closed yet but which will be distributed to DT,

 

Didn't the engadget article say that deal was to be canceled?

 

Expectations are that this will put the kibosh on a recent deal T-Mobile struck with Crown Castle to lease its mobile towers for $2.4 billion.
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Are most of C-Spire's customers postpaid? If so' date=' ~1M postpaid subscribers are probably with triple that amount in prepaid subscribers. Couple that with their reputation for network coverage in the areas that they do serve and I'd say that it's at least worth looking at. Ditto for USCC.[/quote']

 

"900,000 customers in mississippi, memphis metro area, florida panhandle, parts of alabama including Mobile, Rome Georgia".

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What's also interesting is the claim of 20x20 LTE in major markets at AWS freq (although not clear when this happens since they don't expect to shut down Metro's CDMA network until end of 2015), and the fact that they will overlay DT's own version of Network Vision over 37K cell sites (tower-top radios, better backhaul, etc). They are simply following Sprint but 2 years behind. They should be positioned for iPhone 5S (or 6) in late 2013 after the merger closes when DT will have refarmed 1900 for HSPA+ and deployed LTE on AWS (200 million pops).

 

 

According to Fiercewireless they will total an average of 76MHz in the top 25 markets. Clearly, Newco, if they go with unlimited data plans will present major problems for Sprint. Sprint will have to do something to respond.

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They still don't have any <1GHz spectrum.

They still have to maintain HSPA+, which is just as big of a bandwidth junkie as LTE, essentially splitting their spectrum in half.

 

It's not just a direct comparison between amount of spectrum.

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It could be that, by shuffling spectrum around, T-Mobile can isolate MetroPCS CDMA on 1900MHz, rather than just shutting it down ASAP. I think this might take away from T-Mo HSPA spectrum in Las Vegas, but otherwise it's doable within MetroPCS's own holdings (in Dallas they have a 5x5 LTE carrier, which means that all of their voice/non-LTE data is on PCS). And for AWS-only MetroPCS markets, T-Mobile could still just shut down CDMA entirely and push customers over to Sprint CDMA.

 

The result: T-Mobile gets between 5x5 and 10x10 of AWS spectrum to add to their network (10x10 in NYC, adjacent to their current holdings). The company will be able to deploy 20x20 LTE and 5x5 HSPA in a number of markets that they weren't able to before (NYC being a huge one), with the added bonus of more PCS to deploy H+ on.

 

Can't wait for AJ to get a spectrum chart up for AWS and PCS...because I'm too lazy to do it myself :P

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So what company is going to take on the job of acquiring US Cellular? Verizon lines up the best spectrum wise, but would probably get rejected by the FCC. Also they were told to dump 700 a and b and this would have them acquiring more.

 

Sprint would have to sell off AWS and Cellular(850), and 700 just to get some PCS

AT&T makes sense, would the FCC allow it?

T-Mobile is not CDMA, but that doesn't seem to stop them. It would be their first cellular 850 spectrum to maintain, however, and 700 block spectrum. In a lot of ways it would make them a powerhouse, but only in certain geographic areas.

 

US Cellular might just be too hard to integrate and that's probably the reason they are still independent.

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So what company is going to take on the job of acquiring US Cellular? Verizon lines up the best spectrum wise' date=' but would probably get rejected by the FCC. Also they were told to dump 700 a and b and this would have them acquiring more.

 

Sprint would have to sell off AWS and Cellular(850), and 700 just to get some PCS

AT&T makes sense, would the FCC allow it?

T-Mobile is not CDMA, but that doesn't seem to stop them. It would be their first cellular 850 spectrum to maintain, however, and 700 block spectrum. In a lot of ways it would make them a powerhouse, but only in certain geographic areas.

 

US Cellular might just be too hard to integrate and that's probably the reason they are still independent.[/quote']

 

If Sprint purchased US Cellular I do not see any reason why the fcc would force them to divest any spectrum.

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They still don't have any <1GHz spectrum.

They still have to maintain HSPA+, which is just as big of a bandwidth junkie as LTE, essentially splitting their spectrum in half.

 

It's not just a direct comparison between amount of spectrum.

 

T-Mobile, like Sprint, has been able to do incredibly well without using sub-GHz spectrum (of which Sprint has 14MHz). With RRUs (which T-Mobile has been deploying), their PCS site spacing should work well enough for AWS LTE, particularly since modulation complexity of HSPA+ is not far off from LTE (if I remember correctly, both are 64QAM at full rate).

 

As for their WCDMA network, T-Mobile only needs to heep a single 5x5 channel in AWS. The rest can go in PCS, along with GSM and (temporarily) CDMA. Bets on which 2G tech gets phased out first?

 

The real question is how much spectrum each carrier has for LTE, I suppose, accounting for their legacy networks.

 

Sprint has effectively 40MHz in most areas, spread between PCS and SMR, since they'll probably need to keep 5x5 in PCS earmarked for CDMA for the foreseeable future (enough for three CDMA carriers). Out of the remaining 30MHz you have 5x5 in SMR and 5x5 in the PCS G block, which Sprint has to keep as-is because a) There's no more space in SMR and B) Many Print phones only support 5x5 LTE. That leaves at best a single 10x10 channel for LTE on Sprint, discounting Clearwire spectrum.

 

The formula for T-Mobile is more straightforward: take AWS holdings and subtract 5x5. The company can cherry-pick phones that support 20x20 LTE-FD, relying on HSPA+ (including DC-HSPA) for phones that can't do that bandwidth. But back to 20x20...T-Mobile could already do that in a few markets (such as Seattle) and now they can do that in more. This is in AWS spectrum too, so you're looking at a capacity/coverage ratio 4x that of Sprint's with a single 5x5 carrier. O fcourse, the math doesn't quite work out this way...Sprint can add more 5x5 LTE channels...but normal issues with wide channels (reduced transmit power) are mitigated by the fact that LTE is made up of tons of tiny subcarriers, so it appears as though you can transmit 20MHz with just as much RSRP as 5MHz.

 

The scary thing for Verizon, AT&T and Sprint is that T-Mobile's phones will be capable of 20x20 FD-LTE out of the gate if the company so chooses. No one else has the right phones with the right bands to compete with this. And TMo can deploy their network at a good clip since they already have RRUs on some H+ sites and enhanced backhaul to practically every H+ site.

 

The elephant in the room, of course, is Newco's debt. If DT gets greedy, TMo will not be able to move quickly enough. If DT is relaxed about collecitng the loan, be prepared for a company that, once they get CDMA dealt with, will give the other three carriers a run for their money in and around any medium-sized or larger city.

 

Related: I expect Sprint to buy CricKet and swap its AWS for T-Mobile PCS within a year. Now especially since CricKet has a few key pieces of AWS spectrum that T-Mobile would love to have, and between T-Mobile and MetroPCS there's a fair amount of PCS spectrum that Sprint would like.

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T-Mobile' date=' like Sprint, has been able to do incredibly well without using sub-GHz spectrum (of which Sprint has 14MHz). With RRUs (which T-Mobile has been deploying), their PCS site spacing should work well enough for AWS LTE, particularly since modulation complexity of HSPA+ is not far off from LTE (if I remember correctly, both are 64QAM at full rate).

 

As for their WCDMA network, T-Mobile only needs to heep a single 5x5 channel in AWS. The rest can go in PCS, along with GSM and (temporarily) CDMA. Bets on which 2G tech gets phased out first?

 

The real question is how much spectrum each carrier has for LTE, I suppose, accounting for their legacy networks.

 

Sprint has effectively 40MHz in most areas, spread between PCS and SMR, since they'll probably need to keep 5x5 in PCS earmarked for CDMA for the foreseeable future (enough for three CDMA carriers). Out of the remaining 30MHz you have 5x5 in SMR and 5x5 in the PCS G block, which Sprint has to keep as-is because a) There's no more space in SMR and B) Many Print phones only support 5x5 LTE. That leaves at best a single 10x10 channel for LTE on Sprint, discounting Clearwire spectrum.

 

The formula for T-Mobile is more straightforward: take AWS holdings and subtract 5x5. The company can cherry-pick phones that support 20x20 LTE-FD, relying on HSPA+ (including DC-HSPA) for phones that can't do that bandwidth. But back to 20x20...T-Mobile could already do that in a few markets (such as Seattle) and now they can do that in more. This is in AWS spectrum too, so you're looking at a capacity/coverage ratio 4x that of Sprint's with a single 5x5 carrier. O fcourse, the math doesn't quite work out this way...Sprint can add more 5x5 LTE channels...but normal issues with wide channels (reduced transmit power) are mitigated by the fact that LTE is made up of tons of tiny subcarriers, so it appears as though you can transmit 20MHz with just as much RSRP as 5MHz.

 

The scary thing for Verizon, AT&T and Sprint is that T-Mobile's phones will be capable of 20x20 FD-LTE out of the gate if the company so chooses. No one else has the right phones with the right bands to compete with this. And TMo can deploy their network at a good clip since they already have RRUs on some H+ sites and enhanced backhaul to practically every H+ site.

 

The elephant in the room, of course, is Newco's debt. If DT gets greedy, TMo will not be able to move quickly enough. If DT is relaxed about collecitng the loan, be prepared for a company that, once they get CDMA dealt with, will give the other three carriers a run for their money in and around any medium-sized or larger city.

 

Related: I expect Sprint to buy CricKet and swap its AWS for T-Mobile PCS within a year. Now especially since CricKet has a few key pieces of AWS spectrum that T-Mobile would love to have, and between T-Mobile and MetroPCS there's a fair amount of PCS spectrum that Sprint would like.[/quote']

 

I thought tmobile was not using rru's?

 

Aren't they using antennas with built in rru's?

 

With them doing this wouldn't it increase the cost to add new spectrum to there towers ?

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So what company is going to take on the job of acquiring US Cellular? Verizon lines up the best spectrum wise, but would probably get rejected by the FCC. Also they were told to dump 700 a and b and this would have them acquiring more.

 

Sprint would have to sell off AWS and Cellular(850), and 700 just to get some PCS

AT&T makes sense, would the FCC allow it?

T-Mobile is not CDMA, but that doesn't seem to stop them. It would be their first cellular 850 spectrum to maintain, however, and 700 block spectrum. In a lot of ways it would make them a powerhouse, but only in certain geographic areas.

 

US Cellular might just be too hard to integrate and that's probably the reason they are still independent.

 

Why would Sprint sell off the 850Mhz from USCC, all the Sprint devices support that band. Why not keep it for additional spectrum in the market it is in?

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I thought tmobile was not using rru's?

 

Aren't they using antennas with built in rru's?

 

With them doing this wouldn't it increase the cost to add new spectrum to there towers ?

 

Pretty sure they're using RRUs. And as long as the spectrum is harmonized (it is), there's no huge cost to add to an existing deployment.

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So what company is going to take on the job of acquiring US Cellular? Verizon lines up the best spectrum wise, but would probably get rejected by the FCC. Also they were told to dump 700 a and b and this would have them acquiring more.

 

Sprint would have to sell off AWS and Cellular(850), and 700 just to get some PCS

AT&T makes sense, would the FCC allow it?

T-Mobile is not CDMA, but that doesn't seem to stop them. It would be their first cellular 850 spectrum to maintain, however, and 700 block spectrum. In a lot of ways it would make them a powerhouse, but only in certain geographic areas.

 

US Cellular might just be too hard to integrate and that's probably the reason they are still independent.

 

As you mentioned in this hypothetical deal, Sprint could probably sell off the AWS to at&t (or even T-Mobile still). I don't see much reason why they would need to sell of the cellular spectrum. Most of their handsets support it on the CDMA side and Band Class 26 includes it on the LTE side. The 700MHz spectrum might be a bit problematic to deal with, especially the lower A licenses in markets that still have a channel 51 broadcast station. Since this is all hypothetical, maybe the USCC/C-Spire 700MHz licenses could be combined with the lower 700MHz A/B licenses that VZW will be auctioning off to make a compelling semi-nationwide map. Who knows how it'll all shake out...

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So what company is going to take on the job of acquiring US Cellular? Verizon lines up the best spectrum wise, but would probably get rejected by the FCC. Also they were told to dump 700 a and b and this would have them acquiring more.

 

Sprint would have to sell off AWS and Cellular(850), and 700 just to get some PCS

AT&T makes sense, would the FCC allow it?

T-Mobile is not CDMA, but that doesn't seem to stop them. It would be their first cellular 850 spectrum to maintain, however, and 700 block spectrum. In a lot of ways it would make them a powerhouse, but only in certain geographic areas.

 

US Cellular might just be too hard to integrate and that's probably the reason they are still independent.

 

Other than AWS and 700mhz sprint could use the rest of that spectrum. They do not need to sell off the Cellular spectrum.

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By the way, there are a few markets where the scale of this transaction is very visible:

 

NYC - T-Mobile will end up owning AWS C-F, 25x25 MHz contiguous (VZW now owns the other 20x20 MHz)

Dallas - T-Mobile will end up with AWS A + D-F, 10x10 + 20x20 contiguous (VZW wons 10x10 here, AT&T owns 5x5)

 

In Dallas, T-Mobile has 15x15 in PCS of its own. MetroPCS has 5x5 additional, which is adjacent to Sprint but not T-Mobile. TMo could eventually drop an HSPA+ carrier on that channel, or it could sell the slice to Sprint for a healthy sum (or swap it for AWS if Sprint buys CricKet).

 

EDIT: LA will have 25x25 contiguous AWS as well post-MetroPCS.

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Related: I expect Sprint to buy CricKet and swap its AWS for T-Mobile PCS within a year. Now especially since CricKet has a few key pieces of AWS spectrum that T-Mobile would love to have, and between T-Mobile and MetroPCS there's a fair amount of PCS spectrum that Sprint would like.

 

That imo is the ONLY reason why Sprint should even consider looking at Leap...and even then I'm still not sure that it would be a good idea.

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