To compete with arch rival
Leap Wireless International Inc.
), MetroPCS, the prepaid arm of
T-Mobile U.S. Inc.
), has doubled its operational territory. This puts MetroPCS on
par with Leap in many new markets.
MetroPCS' coverage has expanded to a potential customer base
of 150 million from 100 million and includes 13 metropolitan
areas. MetroPCS will also operate separate stores in markets
where T-Mobile services are available. Additionally, it plans to
add 1,000 prepaid stores in the new markets by the end of
Notably, in May 2013, T-Mobile USA, a subsidiary of Deutsche
Telekom, acquired MetroPCS Communications Inc. Per the deal,
MetroPCS shareholders will get cash consideration of $1.5 billion
along with a 26% stake in the combined entity, as compared with
Deutsche Telekom's 76%. Post the deal, MetroPCS added 9 million
customers to the existing 34 million of T-Mobile USA.
Going forward, T-Mobile is reportedly planning to close down
MetroPCS' network over a period of two years and move the
latter's customers into T-Mobile's network. T-Mobile U.S. plans
to utilize MetroPCS' airwaves to build and expand its own
) has proposed to take over the largest prepaid wireless operator
in the U.S., Leap Wireless, for $1.2 billion. Including Leap's
net debt of $2.8 billion, the value of the deal is around $4
billion. Leap offers 3G CDMA and 4G LTE networks, which cover
almost 98% of the U.S. population.
T-Mobile U.S., the fourth largest carrier in the U.S.,
competes with AT&T Inc., Verizon Wireless and
) for postpaid customers, who pay their bills regularly MetroPCS'
superior position in the no-contract wireless market has
encouraged the company to venture into the prepaid sector.
At the end of first-quarter 2013, almost 32% of the
smartphones sold were prepaid as compared with 21% in the
year-ago quarter. The expansion of its prepaid operations is a
timely one for MetroPCS given the growing nature of the business.
As it will take 6-9 months for AT&T to complete the Leap
deal, we believe that penetrating into its rival's market will be
beneficial for MetroPCS, given the nation-wide footprint of
TMUS currently carries a Zacks Rank #3 (Hold).
LEAP WIRELESS (LEAP): Free Stock Analysis
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AT&T INC (T): Free Stock Analysis Report
T-MOBILE US INC (TMUS): Free Stock Analysis
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