T-Mobile/MetroPCS Merger

[PythonFanPA]

BTW, the smartest acquisition play right now for Sprint is to merge with Dish. They have $6-7B in the bank, a stable business, although mature and they have some 40Mhz of spectrum. They could definitely use that $6-7B.

 

Markets like headlines. Sprint has not made any.

 

As a satisfied customer of both, I find this idea highly intriguing. I've no inkling what the realistic possibility of it even remotely happening would be, but it'd be one I'd be fascinated to see unfold purely from a consumer standpoint, to say nothing of the whole technical/spectrum angle of it.

[PythonFanPA]

And furthermore, as someone relatively new here, I wish I could just collectively 'like' every post in this entire thread all at once. There's a wealth of information as well as thought provoking insight contained here. I had saved this thread to read through later as I had time when I first saw it towards the end of my lunch hour yesterday and by the time I reached the end tonight easily an hour+ had passed.

[khammondnm]

Sprint may be making an offer on metro<br /><br />http://www.news-republic.com/Web/ArticleWeb.aspx

[centermedic]

So I just read the back out fee that MetroPCS would pay is 150 Million. I think that the executive board would be all over that if Sprint came with a better offer. In fact if a better offer is on the table it is the boards obligation to to get the best deal for shareholders even if it costs 150 million to get there.

If nothing else it may be shrewd to tender an offer just to drive the price up. After a quick look, newcos financial fundamentals don't look that great.

[ericdabbs]

I still don't understand why Sprint is so adamant on obtaining MetroPCS. Their PCS spectrum holdings are pitiful and of no significance. If Sprint did merge with MetroPCS it would only be to obtain AWS spectrum which none of their LTE devices currently use. I am not sure if Sprint really wants to enter into the hot AWS band which all the major carriers seem to be gravitating to start or supplement their current LTE.

 

At least a purchase of Cricket would have much better PCS holdings and a decent amount of AWS holdings. With the missed payment by Cricket recently, they should be able to be snatched up on the cheap. God I hope Hesse doesn't do anything stupid and overpay. I say just let Tmobile and MetroPCS merge. Sprint should be countering by finishing Network Vision, purchase Cricket and Clearwire outright and purchase all of the PCS 'H' block spectrum. By letting Tmobile have MetroPCS, they would have a sufficient amount of spectrum and with the recent spectrum deals of Verizon and Tmobile that should take them out of the running to bid on the PCS H block spectrum which is very valuable to Sprint. With the 'H' block spectrum, Sprint can run a contiguous 10x10 LTE carrier.

[irev210]

Why does everyone keep looking at this as a spectrum deal?

 

It's 10 million prepaid customers that will cost sprint little actual cash. They need the cash flow.

 

Keep the PCS, sell the AWS to VZN or T-Mobile, move on.

 

Back when Sprint's stock price was in the toilet, the market cap of Sprint was about 7.5 billion. When including the premium to acquire MetroPCS, their market cap would be over 5 billion.

 

The answer was simple - MetroPCS was not worth 2/3rds of Sprint. That's why the board turned the deal down.

 

Today, the picture is a lot different (though not ideal). Sprint's market cap is now 15 billion and so now Metro is only worth 1/3rd of Sprint.

 

 

In less than a year, we went from a small prepaid carrier being worth two-thirds of sprint down to one-third. It should be less, but it is what it is.

 

 

My question is - why not just acquire LEAP? For 6 million prepaid subscribers you could pay about a billion instead of paying 5 billion for 10 million prepaid subs. Let T-Mobile have PCS, Sprint gets LEAP, do spectrum swaps and sales and let T-Mobile have the AWS, Sprint have the PCS, and for once in the wireless world, the right people win.

[WiWavelength]

Why does everyone keep looking at this as a spectrum deal?

 

It is a spectrum deal -- at least, it would be for Sprint. For some discussion of this, see my article, which should be posted on The Wall within the next hour.

 

It's 10 million prepaid customers that will cost sprint little actual cash. They need the cash flow.

 

It is a maximum of 10 million prepaid subs. I project that a significant percentage of those subs will get poached by other prepaid brands and MVNOs -- no matter who acquires MetroPCS. The transition will not be seamless, and the non contract subs have no commitment to stay.

 

AJ

[irev210]

It is a spectrum deal -- at least, it would be for Sprint. For some discussion of this, see my article, which should be posted on The Wall within the next hour.

 

 

 

It is a maximum of 10 million prepaid subs. I project that a significant percentage of those subs will get poached by other prepaid brands and MVNOs -- no matter who acquires MetroPCS. The transition will not be seamless, and the non contract subs have no commitment to stay.

 

AJ

 

To a degree I suppose. But to me, it seems like the larger catalyst is just cashflow that will go straight to the bottom line.

 

We are talking 5 billion in cash that will flow straight to the bottom line every year and only cost sprint about ~2 billion. Basically, it helps justify the massive capex being spent on network vision.

 

The spectrum is nice for the markets that sprint needs additional PCS spectrum, but the fact that operationally, it slots right in with Sprint's other prepaid brands, makes it an operationally attractive target.

 

 

I hope your analyst on the merger also looks at LEAP. I see leap as a MUCH more attractive target for Sprint.

 

Everything I've seen from Sprint on the PCS deal from management (or consolidation in general) is about scale. When fixed costs are so high, you really want to utilize those fixed costs as much as possible. To justify the capex, you need scale. Eventually, when you get to cell splitting, additional subs are expensive... but that's a different story.

[ericdabbs]

Why does everyone keep looking at this as a spectrum deal?

 

It's 10 million prepaid customers that will cost sprint little actual cash. They need the cash flow.

 

Keep the PCS, sell the AWS to VZN or T-Mobile, move on.

 

Back when Sprint's stock price was in the toilet, the market cap of Sprint was about 7.5 billion. When including the premium to acquire MetroPCS, their market cap would be over 5 billion.

 

The answer was simple - MetroPCS was not worth 2/3rds of Sprint. That's why the board turned the deal down.

 

Today, the picture is a lot different (though not ideal). Sprint's market cap is now 15 billion and so now Metro is only worth 1/3rd of Sprint.

 

 

In less than a year, we went from a small prepaid carrier being worth two-thirds of sprint down to one-third. It should be less, but it is what it is.

 

 

My question is - why not just acquire LEAP? For 6 million prepaid subscribers you could pay about a billion instead of paying 5 billion for 10 million prepaid subs. Let T-Mobile have PCS, Sprint gets LEAP, do spectrum swaps and sales and let T-Mobile have the AWS, Sprint have the PCS, and for once in the wireless world, the right people win.

 

I am starting to think that Sprint may want to get MetroPCS to get more spectrum even if it is AWS band. Lets just be honest, the PCS holdings for MetroPCS are pitiful. If you are telling me that Sprint is spending all this money to just get 10 million subs which can leave at any time and for PCS spectrum licenses that only benefit maybe 10 cities then that is a waste. However MetroPCS does have a considerable chunk of AWS spectrum enough for a 10x10 carrier in a lot of the major cities including LA, NY, Dallas, Houston, San Antonio, SF, San Diego, etc. If Sprint bought MetroPCS, I would keep the AWS spectrum. If Sprint did sell the AWS and is betting on obtaining all of the 'H' block for its footprint and relying on PCS spectrum swaps with other carriers, I think its putting too many eggs in one basket and would be a dumb move IMO. With obtaining AWS spectrum, it is more of an insurance that Sprint has backup spectrum in case it can't obtain all the PCS spectrum it needs from the H block and PCS spectrum swaps from other carriers. Why would you sell any spectrum when it is so hard to bid and win spectrum licenses at auctions and in this case the MetroPCS AWS spectrum are in a lot of major markets in the US which is served to Sprint on a silver platter. Do not waste it by selling it. If anything Sprint should sell all of its WCS spectrum for cash.

 

I don't think its wrong for Sprint to start thinking of adding the AWS band since the FCC plans to expand the AWS band aggressively with new spectrum auctions and not so much the PCS band other than the 'H' block so the AWS band growth potential is there. I know this would add another LTE band to Sprint's lineup of 800, 1900 and 2500 MHz but the fact is eventually every carrier will have need to support multiple bands for LTE so I don't see any problem with Sprint adding AWS spectrum to its LTE lineup. The chipsets are out there in the market currently and it would be all about how to integrate the necessary antennas for all these bands into the handset. We know that all 2012 LTE phones will contain only 1900 MHz LTE support. 2013 LTE phones are expected to add 2500 MHz and most likely 800 MHz support. If Sprint were to obtain MetroPCS, they could add AWS LTE support as soon as 2014 LTE phones depending on how Sprint would approach deploying LTE in AWS band.

 

If you look at AT&T which still have 850 MHz Cellular, 1900 MHz PCS, 1700 MHz AWS and 2300 MHz WCS bands as potential LTE bands and that is on top of their 700 MHz LTE. That would be a total of 5 LTE bands to support. Same with Verizon, they still have 850 MHz Cellular, 1900 MHz PCS and 1700 MHz AWS bands that can be added for LTE on top of their 700 MHz LTE. That would be a total of 4 LTE bands to support which would be the same number of LTE bands Sprint would need to support. All this talk about..OMG Sprint shouldn't do it since it would have to add another LTE band to its lineup is just laughable if you consider that AT&T and Verizon would be in similar situations within the next 2-3 years.

[irev210]

I am starting to think that Sprint may want to get MetroPCS to get more spectrum even if it is AWS band. Lets just be honest, the PCS holdings for MetroPCS are pitiful. If you are telling me that Sprint is spending all this money to just get 10 million subs which can leave at any time and for PCS spectrum licenses that only benefit maybe 10 cities then that is a waste.

 

How can you say that is a waste? They would give up some equity in Sprint to merge the two entities, pay maybe 1.5 billion in cash, and get 10 million prepaid subs that's extremely compatible with Sprint's network that have an ARPU that is 50% higher than Sprint's own prepaid arm with lower churn.

 

They can leave at any time, yet they are, for the most part, growing subs, not losing them. I don't really see how you can't say that from a financial perspective it is a waste. The biggest issue is how much equity would sprint give up - and it's half as much as it was in feb now that the stock price has doubled.

 

While contract customers always have a higher value, it doesn't mean that prepaid customers are worthless. They aren't. Yeah, there is churn issues, but that's the prepaid market... and the prepaid market on a whole, is growing, not shrinking.

[WiWavelength]

I am starting to think that Sprint may want to get MetroPCS to get more spectrum even if it is AWS band. Lets just be honest, the PCS holdings for MetroPCS are pitiful.

 

I disagree. MetroPCS' PCS 1900 MHz holdings are hardly "pitiful." Sure, that PCS spectrum is limited to a select few markets. But MetroPCS cherry picked them as some of the largest markets in the country. And as I detail in my article, Sprint happens to need a bit more PCS spectrum to round out its holdings in several of those markets. So, that "pitiful" PCS spectrum could actually be highly valuable to Sprint.

 

AJ

[iansltx]

I disagree. MetroPCS' PCS 1900 MHz holdings are hardly "pitiful." Sure, that PCS spectrum is limited to a select few markets. But MetroPCS cherry picked them as some of the largest markets in the country. And as I detail in my article, Sprint happens to need a bit more PCS spectrum to round out its holdings in several of those markets. So, that "pitiful" PCS spectrum could actually be highly valuable to Sprint.

 

AJ

 

By way of contrast, MetroPCS has at most 10x10 of AWS in any given area. That's fine if you've already got an AWS portfolio, but as a nationwide network, their AWS doesn't quite do enough to merit integrating another band into devices (added cost), base stations (added cost) etc. Much easier to sell the AWS off or swap it for PCS.

 

Let T-Mobile and Verizon own AWS, and when T-Mobile needs more funding for expansion, buy PCS off of them.

[WiWavelength]

Sascha Segan has written a good article on why NewCo would be forced to operate 10 MHz x 10 MHz (T-Mobile) and 5 MHz x 5 MHz (MetroPCS) in parallel on AWS for the first several years. Why? MetroPCS LTE devices, like many Sprint LTE devices, do not support LTE beyond the 5 MHz FDD configuration.

 

http://www.pcmag.com...,2410644,00.asp

 

AJ

[Fraydog]

As far as AWS... I think Verizon needs it more than AT&T does, but T-Mobile needs it the most.

 

AT&T still has boat loads of PCS from the AT&T/Cingular merger. With their iPhone-centric smartphone base upgrading fast, they'll be able to start freeing PCS for LTE next year (probably in time for the 5S). VoLTE will come online at about the same time for them.

 

Verizon isn't showing any signs of using their newly acquired SpectrumCo AWS until 2013 as well. Surprisingly the of the version iPhone 5 does not support AWS.

 

T-Mobile is the only carrier using AWS now, barring a few spots where we can't confirm whether AT&T is using AWS or not.

[ericdabbs]

By way of contrast, MetroPCS has at most 10x10 of AWS in any given area. That's fine if you've already got an AWS portfolio, but as a nationwide network, their AWS doesn't quite do enough to merit integrating another band into devices (added cost), base stations (added cost) etc. Much easier to sell the AWS off or swap it for PCS.

 

Let T-Mobile and Verizon own AWS, and when T-Mobile needs more funding for expansion, buy PCS off of them.

 

If that is possible then yes, Sprint should pursue AWS to PCS spectrum swaps to bolster their PCS holdings. However, I don't see Verizon, AT&T or Tmobile parting with their PCS spectrum since they all use it heavily on their network. AT&T deploys the majority of HSPA+ and some GSM on 1900 MHz, Verizon deploys their EVDO and CDMA networks on 1900 MHz and Tmobile is now going to be relying on its PCS spectrum to migrate HSPA+ from 1700 MHz to 1900 MHz as part of their challenger program.

 

I just feel like it sounds great in theory but practically, I just don't see the 3 other major carriers easily parting their small amount of PCS spectrum they have even for a AWS swap since they still need to support their legacy systems. Since MetroPCS has about 20 MHz of AWS spectrum in a lot of the major cities, I just don't see any of the 3 major carriers swapping 20 MHz of PCS spectrum for 20 MHz of AWS spectrum if we want to be fair. I would much rather have Sprint keep the AWS spectrum and possibly deploy LTE on it in the future. Like I said in my other post that eventually Verizon and AT&T will have to deal with the same problem as Sprint of incorporating LTE support for all their LTE bands in the handset. AT&T would have the most with 5 followed by Verizon with 4 LTE bands. Lets not forget that the FCC is trying to expand the AWS band more so than the PCS band so there is potential growth that if Sprint were to pursue AWS that they can obtain the missing AWS spectrum they need in future auctions which would be lacking from a potential MetroPCS/Sprint deal.

 

While I hope that Sprint can obtain all of the PCS 'H' block spectrum licenses for their footprint, I just find it hard that no other carrier would come in especially AT&T and try to snap up key markets which would ruin Sprint's plan of having nationwide 10x10 contiguous block for LTE of which they need it most.

[Rawvega]

It would be nice if at&t and Verizon were barred from participating in the H block auction. If t-mobile acquires metroPCS, they probably should be barred too.

 

Sent from my PG86100 using Tapatalk 2

 

 

[hescominsoon]

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.

 

I've had a chance to hit a sprint 4g tower here recently. it was nice being able to do data and voice at the same time. is the new sprint NV not volte?

[digiblur]

 

I've had a chance to hit a sprint 4g tower here recently. it was nice being able to do data and voice at the same time. is the new sprint NV not volte?

 

You don't need 4g to do voice and data right now. I know the evo lte and s3 can do it in 3g only areas.

 

Sent from my C64 w/Epyx FastLoad cartridge

 

 

[PythonFanPA]

You don't need 4g to do voice and data right now. I know the evo lte and s3 can do it in 3g only areas.

 

Sent from my C64 w/Epyx FastLoad cartridge

 

As does the Photon Q

[Bob Newhart]

I really do hope that Sprint doesn't buy any company at all. They need to finish what they have started first.

 

I don't get the T-Mobile merger, neither company is actually using most of the spectrum they actually have. They should be forced to either use it or give it up.

[hescominsoon]

You don't need 4g to do voice and data right now. I know the evo lte and s3 can do it in 3g only areas.

 

Sent from my C64 w/Epyx FastLoad cartridge

 

without wifi assistance?

[supert0nes]

 

I don't get the T-Mobile merger, neither company is actually using most of the spectrum they actually have. They should be forced to either use it or give it up.

 

We know with T-Mobile's network vision type project, they will be utilizing most all of their PCS and AWS spectrum in every market. Companies don't have to have the network built yesterday when they acquire spectrum. A company like T-Mobile will put any available spectrum they can to use as fast as possible.

 

I realize that NewCo will have some excess in certain markets like AJ's article shows, but I also expect them to have to sell that excess off to make for a much more fair and competitive spectrum landscape.

[PythonFanPA]

without wifi assistance?

 

Correct

[hescominsoon]

interesting...i'm not a fan of touchwiz that's why i went with the galaxy nexus..

[digiblur]

interesting...i'm not a fan of touchwiz that's why i went with the galaxy nexus..

 

You could do the Sense thing. Also, the iPhone5 does not have this feature. Maybe the 6 will.

 

Sent from my C64 w/Epyx FastLoad cartridge