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Banks May Split $50 Million Advising on T-Mobile-MetroPCS Merger

October 03, 2012

Banks May Split $50 Million Advising on T-Mobile-MetroPCS Tie-Up

First in line are Morgan Stanley and JPMorgan Chase & Co., lead advisers to Deutsche Telekom and MetroPCS, respectively. Photographer: Victor J. Blue/Bloomberg

Banks advising on Deutsche Telekom AG (DTE)’s merger of its T-Mobile USA Inc. unit with MetroPCS Communications Inc. (PCS:US) may earn at least $50 million if the deal goes through, according to research firm Freeman & Co.

First in line are Morgan Stanley and JPMorgan Chase & Co., lead advisers to Deutsche Telekom and MetroPCS, respectively. The amount they’ll split with other banks, which may range from $50 million to $80 million, is at least 36 percent less than the $125 million advisers would have gotten if AT&T Inc. (T:US)’s $39 billion bid for T-Mobile last year had succeeded, according to New York-based Freeman.

The money may help ease the concern of deal advisers reeling from the slowest quarter for mergers and acquisitions globally in more than two years. Deutsche Telekom’s agreement yesterday with MetroPCS would give T-Mobile more heft to compete with Verizon Wireless, the largest U.S. mobile-phone company, and No. 2 AT&T.

It’s difficult to value a deal when one of the sides is closely held, said Craig Moffett, an analyst at Sanford Bernstein & Co. in New York. An optimistic view would value MetroPCS’s shares at about $18 in the transaction, including the cash, he said. That would imply a market value of $6.5 billion.

Walt Piecyk, an analyst with BTIG LLC in New York, said the merger values MetroPCS at $15 to $16, assuming the companies are able to deliver on their promise of synergies. MetroPCS shares sank (PCS:US) 9.8 percent yesterday to $12.24 in New York.

Deal Advisers

Deutsche Telekom received advice from Morgan Stanley bankers Jim Murray, Adam Shepard and Bob Eatroff. The German carrier also got help from Lazard Ltd., as well as law firms Wachtell, Lipton, Rosen & Katz; Cleary Gottlieb Steen & Hamilton LLP; K&L Gates; and Wiley Rein LLP.

MetroPCS worked with bankers at JPMorgan including Fred Turpin, Anwar Zakkour, Jessica Kearns and Paul Finger. The carrier also received advice from John Trousdale, Don Birchenough and Bill Raincsuk at Credit Suisse Group AG, while Evercore Partners Inc. banker Michael Price gave a fairness opinion to its board. The company worked with law firms Gibson, Dunn & Crutcher LLP, Paul Hastings, Telecommunications Law Professionals, Akin Gump and Fulbright & Jaworski.

Morgan Stanley is currently No. 2 and JPMorgan third in global advisory rankings based on market share, behind Goldman Sachs Group Inc., according to data compiled by Bloomberg. All three are based in New York. Credit Suisse is No. 6 and Lazard 11th, according to the data.

Deal’s Terms

Deutsche Telekom, Germany’s largest phone company, will own 74 percent of the new U.S. mobile operator, and MetroPCS investors will get $1.5 billion in cash, the companies said. The merged entity will keep the T-Mobile name and be led by John Legere, the former chief executive officer of Global Crossing Ltd. who took over Deutsche Telekom’s U.S. unit last month.

Should T-Mobile back out of the agreement, the company would owe Richardson, Texas-based MetroPCS $250 million, Legere said. The reverse breakup fee that MetroPCS would pay is $150 million, a fraction of the fee AT&T had to pay after scrapping its offer for T-Mobile amid regulator opposition.

According to the terms of that deal, AT&T had to pay Bonn- based Deutsche Telekom a $3 billion breakup fee in cash, transfer radio spectrum to T-Mobile and strike a more favorable network-sharing agreement. Deutsche Telekom had valued the breakup package at as much as $7 billion.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editor responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net


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