(Updates with closing shares in 13th paragraph.)
Oct. 21 (Bloomberg) -- MetroPCS Communications Inc. has emerged as the frontrunner to buy assets from AT&T Inc. and T- Mobile USA Inc. as those companies seek to win government approval for their $39 billion merger, according to people familiar with the matter.
Though the size of the deal isn’t yet definite, it would likely include subscribers and wireless spectrum, said the people, who couldn’t be identified because the talks aren’t yet public. The deal’s value is likely to be less than $4 billion, said one person.
AT&T approached smaller rivals including Dallas-based MetroPCS, Leap Wireless International Inc. and Dish Network Corp., people familiar with the matter said last month. Though Leap is still in talks with AT&T, MetroPCS, with more than $2 billion in cash and short-term investments, has a stronger balance sheet, the people said.
As part of the deal, Deutsche Telekom is prepared to help MetroPCS with financing, said one of the people.
Jonathan Chaplin, an analyst at Credit Suisse Group AG, said a MetroPCS purchase is logical since the company needs spectrum and could trim capital costs if a deal goes through.
“A transaction could be transformative,” Chaplin said in a research note, adding that the value of a deal is likely to be less than $2 billion.
AT&T is seeking ways to salvage its agreement to buy T- Mobile USA from Bonn-based Deutsche Telekom AG after the U.S. Justice Department sued on Aug. 31 to stop the deal. The talks with MetroPCS may not lead to a deal, and the Justice Department may also deem the remedies insufficient, the people said.
“Spinning off some of T-Mobile’s customers or network doesn’t really remedy the government’s issue with the merger, which is that T-Mobile is such a disruptive and significant competitor that anything which makes them no longer independent would be unacceptable,” said Glenn Manishin, a lawyer with Duane Morris LLP in Washington. “It’s unlikely that sufficient assets could be transferred to any of the regional players to make them into a national network.”
MetroPCS had 9.1 million wireless subscribers at the end of June, compared with more than 100 million for Verizon Wireless, the country’s largest operator. AT&T reported today that it had 100.7 million subscribers at the end of September.
AT&T and MetroPCS aim to meet within the next two weeks with the Justice Department to determine whether the remedies will satisfy the regulator, said two of the people.
Drew Crowell, a MetroPCS spokesman, and Michael Balmoris, an AT&T spokesman, declined to comment on any potential deal.
Andreas Fuchs, a Deutsche Telekom spokesman, declined to comment on possible disposals or financing. Gina Talamona, a Justice Department spokeswoman, declined to comment.
MetroPCS rose 1.8 percent to $9.19 at the close in New York, and is down 27 percent this year. AT&T gained 0.5 percent to $29.13, and is little changed this year.
MetroPCS this month told regulators it would be “premature” to block AT&T’s proposed acquisition of T-Mobile USA. Mark Stachiw, a MetroPCS executive, made the statement in an Oct. 13 meeting with Federal Communications Commission officials, according to a filing posted on the agency’s website this week.
--With assistance from Cornelius Rahn in Frankfurt. Editors: Peter Elstrom, Ville Heiskanen
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