MetroPCS Communications Inc.
) has received another bid offer from T-Mobile USA, subsidiary of
Deutsche Telekom AG to woo shareholders who stood against the
proposed merger. Last week, T-Mobile, in its final offer to
MetroPCS, reduced the combined company's debt burden by $3.8
billion to $11.2 billion. The latest amendments in the deal terms
were appreciated by most of the shareholders of MetroPCS and
added optimism on the closure, expected by mid
Despite receiving all the regulatory approvals, MetroPCS and
T-Mobile deal remained surrounded by uncertainties given constant
pressure by shareholders on modifying deal terms. Some of the
major shareholders like P. Schoenfeld Asset Management LP and
Paulson & Co strongly condemned the merger agreement citing
unfair valuation to MetroPCS' shareholders alongside a high debt
level imposed on the combined entity that would ultimately hurt
the viability of the merger.
However, MetroPCS' board of directors tried to nullify these
arguments stating the deal offers shareholders a 70% to 90%
premium. In addition, the proposed merger is expected to generate
positive synergies for both the companies in terms of financial
growth with estimated five-year CAGR for revenues, EBITDA and
free cash flow in the range of 3-5%, 7-10% and 15-20%,
Further, the deal will also add to spectrum capacity and
result in higher penetration of LTE networks that support speeds
up to 20x20 MHz of 4G LTE in several regions. T-Mobile will be
able to benefit from MetroPCS' superior market position in no
contract wireless services, while MetroPCS will gain from
T-Mobile's advance B2B services and Mobile virtual network
operator (MVNO) platform.
However, we believe the emergence of new terms of lowering
debt leverage signifies the effort of T-Mobile and MetroPCS to
meet halfway in order to accomplish the proposed deal. Hopefully,
the new terms would help the two companies establish an
encouraging framework on agreement that would set positive
grounds when the deal appears for shareholder's approval on Apr
Apart from financial benefits, the merger between MetroPCS and
T-Mobile will boost their operation capabilities in the U.S. and
will also offer strong resistance against big industry players
Verizon Communications Inc
Sprint Nextel Corp.
Currently, MetroPCS and T-Mobile have over 9 million and 33
million subscribers, respectively. This will form a subscriber
base of more than 40 million for the combined company.
METROPCS COMMUN (PCS): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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MetroPCS has a Zacks Rank #3 (Hold).