T-Mobile USA’s parent company, Deutsche Telekom AG (News - Alert), is planning to combine MetroPCS Communications with its U.S. wireless business. Thus, giving T-Mobile USA more power to compete with giants like Verizon Wireless and AT&T, according to Bloomberg (News - Alert) News.
A Bloomberg report confirms that Germany’s Deutsche Telekom is planning to bring the two U.S. operators under one company, in which it will hold the majority of shares. Sources close to the situation told Bloomberg’s German reporter Cornelius Rahn that Deutsche Telekom’s supervisory board is scheduled to meet in Bonn on Wednesday to approve the transaction.
One source told Bloomberg that the deal will involve multiple steps including a stock swap. Alexandre Iatrides, an analyst at Oddo & Cie in Paris, has a neutral recommendation on Deutsche Telekom stock. He said, “The potential synergies are so high, and this would resolve the huge issue that is T-Mobile USA with a real long-term solution.”
In a statement, Deutsche Telekom said, “The talks are at a stage where significant issues have not yet been finalized, contracts have not yet been signed and the conclusion of the transaction is still not certain.”
“The board of management and supervisory board of Deutsche Telekom have therefore not yet taken the resolutions necessary for such a transaction,” added Deutsche Telekom.
The Oddo & Cie analyst thinks that T-Mobile (News - Alert) USA and MetroPCS could generate synergies worth $1.2 billion to $1.7 billion a year. Also, Iatrides predicts that an official announcement of this deal could drive Deutsche Telekom’s share price by 1 euro.
The Bloomberg report suggests that this kind of combination would give T-Mobile USA an additional 9.3 million prepaid customers.
Last month, T-Mobile’s parent named John Legere, a 32-year veteran of the U.S. and global telecommunications and technology industries, as new chief executive officer of T-Mobile business unit. Legere succeeds Jim Alling, who has served as interim CEO since June and will return to his position as T-Mobile’s chief operating officer.
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Edited by Rachel Ramsey