DoJ Seeks More Information From MetroPCS On T-Mobile Deal

by Gaurav Kheterpal on November 21, 2012

In October, a starting turn of events ensued when American telecommunications market, Deutsche Telekom, parent company of T-Mobile, announced its intention to acquire prepaid regional wireless carrier MetroPCS. It made sense for both companies as Like T-Mobile, MetroPCS also found itself struggling. Though both companies are profitable, their smartphone catalogues are found wanting (no iPhone), their network technologies are substandard (no LTE), and both are hemorrhaging customers at an alarming rate.

Deutsche Telekom would have hoped the similar struggles of two competitors can magically turn into the success of one newly unified front, giving the new combined carrier the wireless spectrum, customer base, and financial security it needs to be able to compete and succeed against the marketplace duopoly of AT&T and Verizon.

However, shortly thereafter, the deal fell in rough weather as MetroPCS shareholders filed a lawsuit claiming they’re being cheated through a “drastically undervalued” merger. Yesterday, the Department of Justice (DoJ) has asked MetroPCS for more information in relation to its proposed reverse merger with T-Mobile USA.

Reports suggest that MetroPCS Communications had strategic partnership or takeover discussions with nine companies before deciding on T-Mobile USA and it’s expected that more muddy details could be disclosed as part of the DoJ enquiry.

MetroPCS says it plans to  fully cooperate with DoJ so that it can “obtain the approval of the transaction as soon as possible.” The company expects he transaction, which is subject to shareholder and regulatory approvals, to be completed in the first half of next year. The information request will extend the waiting period under the HSR Act, an antitrust act, to 30 days after the companies comply.

It is believed that MetroPCS was in talks with Dish Network, DBSD, Terrestar, Leap Wireless, U.S. Cellular, AT&T Inc., Sprint and Verizon before it decided to exchange vows with T-Mobile. The proposed deal, which will see stocks switch hands between companies, MetroPCS shareholders will get $1.5 billion in cash and a 26 percent stake in the combined company, while Deutsche Telekom will own the other 74 percent of the company (and interesting move for the German company that publicly stated its desire to leave the American wireless market during the AT&T acquisition fiasco).

Analysts, though, do not rule out the possibility of MetroPCS to receiving a superior bid. The company’s stocks have already climbed raising the possibility that a counteroffer may surface.

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Written by: Gaurav Kheterpal. Follow TheTelecomBlog.comby: RSS,TwitterFacebook, or YouTube.


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