Bloomberg News

T-Mobile Shares Climb in NYSE Debut After MetroPCS Merger (1)

May 01, 2013

T-Mobile US Inc., the fourth-biggest U.S. wireless company, climbed 6 percent in its first day of trading on the New York Stock Exchange after merging with MetroPCS Communications Inc. (PCS:US), a smaller rival.

The stock, which trades under the new ticker TMUS, rose to $16.52 at the close in New York. T-Mobile took the spot of MetroPCS on the exchange after the reverse merger. The new company, which also changed its name by dropping the “A” from T-Mobile USA, will still be located at the carrier’s current headquarters in Bellevue, Washington.

The deal gives Deutsche Telekom AG (DTE), T-Mobile’s parent, a 74 percent stake in the entity and MetroPCS investors a cash payment of $1.5 billion, or $4.06 a share, as well as the remaining stake in the company. T-Mobile Chief Executive Officer John Legere said today that he welcomed the increased scrutiny that comes with being a publicly traded stock.

“It will be fun to have people voting on the stock every day,” Legere said in an interview. “Since we announced the deal with MetroPCS in October, there’s been so much progress with the company.”

T-Mobile has more than 40 million customers following the merger. The MetroPCS deal also gave it a larger holding of airwave licenses, helping it compete with Verizon Wireless, AT&T Inc. (T:US) and Sprint Nextel Corp. (S:US), the industry’s top three.

Sprint Saga

Sprint, meanwhile, is weighing its own deal options. After SoftBank Corp. agreed to acquire control of the company in a $20.1 billion transaction, Dish Network Corp. stepped in last month with a $25.5 billion offer. SoftBank President Masayoshi Son defended his bid yesterday and questioned the ability of Dish Chairman Charlie Ergen to execute his deal.

Legere said he’s enjoyed watching the two industry personalities tussle over Sprint.

“Right now, I hope they fight for another year,” Legere said on Bloomberg Television. “While they are wrestling, what is not happening is a focus on customers.”

On April 10, bowing to shareholder pressure, Deutsche Telekom agreed to lower the size and interest rate of its loan to the joint company. The modified merger terms cut the shareholder loan to $11.2 billion from $15 billion and trimmed the interest rate by half a percentage point.

Investor Endorsement

The deal won the endorsement of MetroPCS’s largest investor, Paulson & Co., as well as two shareholder-advisory firms in the run-up to the investor vote. On April 24, MetroPCS shareholders approved the transaction.

T-Mobile has lagged behind peers in constructing faster networks and it was the last major carrier to sell Apple Inc. (AAPL:US)’s iPhone, which it began offering last month. To turn around the company, Legere rolled out a new strategy this year that dispenses with long-term contracts. T-Mobile now offers smartphones on installment plans, rather than using the typical subsidies offered by other major carriers.

For Deutsche Telekom CEO Rene Obermann, the deal brings a successful conclusion to years of travel and negotiations to find a solution for the company’s U.S. business. A $39 billion agreement to sell T-Mobile to AT&T collapsed in 2011 because of opposition by regulators.

While Deutsche Telekom has agreed not to sell the shares on the market for 18 months, the new T-Mobile will facilitate an eventual withdrawal from the U.S., people familiar with Obermann’s plans have said.

Jennifer Fritzsche, an analyst with Wells Fargo & Co. in Chicago, welcomed the arrival of a publicly traded T-Mobile US to the market in a note this week.

“We have a new guest at the party,” Fritzsche wrote.

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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