MetroPCS Communications, Inc.
) and T-Mobile USA merger faces uncertainty prior to the
shareholder round for its approval. In a recent press release,
MetroPCS stated that its shareholder, P. Schoenfeld Asset
Management LP, issued a letter questioning the viability of the
P. Schoenfeld has strongly condemned the proposed merger,
citing unfair valuation to MetroPCS' shareholders. The
shareholder also criticized that the deal is not properly
sketched out. Further, P. Schoenfeld highlights the fact that
MetroPCS could have considered other viable options that could
have aided in appraising its market value as a stand-alone
News regarding the debacle with shareholders' consent has been
hitting headlines since the company received the FCC approval.
Another major shareholder, Paulson & Co also condemned the
deal on grounds of the high debt level that it would impose on
the new entity.
However, last week, MetroPCS issued a letter stating that the
deal offers shareholders a 70% to 90% premium. In addition, the
combined debt capital for the new company would be similar to
that of the other big players in the industry and historical
average of MetroPCS.
MetroPCS strongly believes that the merger with T-Mobile USA
would boost its operations in the U.S. and safeguard its market
share against rivals like
Verizon Communications Inc.
Sprint Nextel Corp.
If the deal materializes, it is expected to expedite financial
growth with the estimated five-year CAGR for revenues, EBITDA and
free cash flow in the range of 3-5%, 7-10% and 15-20%,
respectively. Further, Deutsche Telekom will also facilitate the
merged company's operations with the $5.5 billion backstop
commitment for MetroPCS third-party financial dealings.
We believe that despite significant progress in the MetroPCS
and T-Mobile merger, constant backlash between shareholders add a
level of uncertainty to its prospects. Further, such issues
adversely affect the market value of the company as these create
negative sentiments among investors.
MetroPCS has a Zacks Rank #3 (Hold).
METROPCS COMMUN (PCS): Free Stock Analysis
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