MetroPCS Communications Inc. (PCS) shareholders approved a sweetened deal to merge with Deutsche Telekom AG (DTE)’s T-Mobile USA in a crucial vote that gives the German company a chance to revive its U.S. business.

MetroPCS Shareholders Approve T-Mobile Merger to Challenge AT&T  David Paul Morris/Bloomberg
The silhouette of a customer browsing phones is seen in a MetroPCS Communications Inc. store in San Francisco.

The transaction will probably be completed by May 1 after today’s ballot cleared the final hurdle for the combination of the country’s fourth- and fifth-largest wireless carriers, Bonn- based Deutsche Telekom said in a statement.

Bowing to shareholder pressure, Deutsche Telekom on April 10 agreed to lower the size and interest rate of a loan to the joint company. The transaction adds more than 9 million prepaid customers to T-Mobile, as well as wireless spectrum needed to provide faster data services to compete with market leaders Verizon Wireless and AT&T Inc. (T)

“It’s good news, because you could never really be certain until the last moment,” said Alexandre Iatrides, an analyst at Oddo & Cie. in Paris who recommends buying Deutsche Telekom shares. “It’s one step, but it’s not enough.”

T-Mobile lost 13 percent of its contract customers between 2009 and 2012 as it lagged behind peers in constructing faster networks and offering Apple Inc. (AAPL)’s iPhone. As T-Mobile began to offer the device this month, Chief Executive Officer John Legere will have to show that a strategy of scrapping long-term contracts will win back subscribers.

Sweetened Deal
The carrier, which has earmarked network investments of $4.8 billion this year, last month switched on its own high- speed service using the long-term evolution technology.

Deutsche Telekom rose 1.8 percent to 8.98 euros at 5:20 p.m. in Frankfurt. MetroPCS, based in Richardson, Texas, slipped 0.9 percent to $11.59 in New York trading.

The improved merger terms, which cut the shareholder loan to $11.2 billion from $15 billion and trim the interest rate by half a percentage point, won the endorsement of MetroPCS’s largest investor, Paulson & Co., as well two shareholder- advisory firms in the run-up to the vote.

The deal gives Deutsche Telekom a 74 percent stake in the merged entity and MetroPCS shareholders a $1.5 billion cash payment. The enlarged T-Mobile USA will be exchange-listed and Deutsche Telekom has agreed not to sell the shares on the market for 18 months.

Merger Frenzy
“We voted for it because we were happy to see that Deutsche Telekom realized the value contribution MetroPCS made to the combined companies,” said Roy Behren, who co-manages the $4.7 billion Merger Fund at Westchester Capital in Valhalla, New York. “We look forward to having another strong competitor in the wireless industry.”

The pace of consolidation in the U.S. is picking up. Dish Network Corp. last week offered $25.5 billion for Sprint Nextel Corp., the nation’s third-biggest mobile-phone carrier, beating terms offered by Japan’s Softbank Corp (9984). in October.

“Since there are two companies bidding for Sprint, one of them will be disappointed and may come back for T-Mobile,” Oddo’s Iatrides said.

For Deutsche Telekom CEO Rene Obermann, the shareholder approval brings into reach a successful conclusion of years of travel and negotiations to find a solution for the company’s U.S. business. A $39 billion agreement to sell T-Mobile to AT&T collapsed in 2011 because of opposition by regulators.

“This is a major step for Deutsche Telekom,” Obermann said in the statement. “The merger with MetroPCS is extremely important, since it enables us to be more aggressive in the USA.”

By: Docmemory
Copyright © 2023 CST, Inc. All Rights Reserved