What a 24 hours it’s been for merger talk in the communications industry.
News broke Monday night that tw telecom might be gobbled up CenturyLink; now comes word that that T-Mobile USA’s parent company Deutsche Telekom is very close to a deal with MetroPCS to combine their wireless forces. DT reportedly confirmed a Bloomberg report spilling the beans on the talks.
T-Mobile has been floundering in fourth place, without the right to sell the most popular gadget in the world Apple’s iPhone. It’s seen subscribers leave for bigger rivals and its financials have struggled. But the new report says DT’s board will meet in Germany tomorrow to approve the proposed agreement.
No word yet just how much the deal might be worth, but MetroPCS, America’s fifth-largest wireless operator, saw its stock price jump a whopping 18 percent today on the news. And it’s a boon to competitors as well prepaid operator Leap Wireless, which owns Cricket Communications, was up 8 percent on the possibility a rival, low-cost operator might be purchased.
Bloomberg’s sources say DT has been thinking about buying MetroPCS for several months now, and wants to pursue being publicly traded on a U.S. stock exchange. A stock swap will likely be included in the agreement, those same “people with knowledge of the matter” said.
This could be the fuel T-Mobile has desperately needed to compete with the likes of Verizon Wireless, AT&T, and even Sprint, the third-largest carrier. But if approved by the companies’ boards, there could still be a long regulatory battle ahead; it’s been less than a year since T-Mobile’s failed merger with AT&T went down the tubes. This one, however, could be much different. This deal would more likely create another highly competitive wireless carrier whereas an AT&T-T-Mo merger might have made the landscape much less competitive.
Analysts at Stifel Nicolaus said Tuesday afternoon that they “do not see any initial regulatory roadblocks to the deal.” The firm believes there might be ”little impact on Verizon Wireless and AT&T Mobility, as they continue to focus and dominate the postpaid market in the U.S., with a stronger low-end, pre-paid operation from a combined TMO/PCS negatively impacting carriers that focus more on prepaid offerings.