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T-Mobile parents says it's looking to buy MetroPCS

Deutsche Telekom, the German company that owns T-Mobile, confirms that it's in talks to buy MetroPCS but says no deal has been reached.

October 03, 2012|By Andrea Chang, Los Angeles Times

The parent company of T-Mobile USA Inc. has confirmed it is in talks to buy rival MetroPCS Communications Inc. in a deal that would give the combined entity more clout in the competitive U.S. wireless market.

After weeks of speculation, German company Deutsche Telekom, which owns T-Mobile, said Tuesday that it was eyeing MetroPCS but that no decision had been reached.

"The talks are at a stage where significant issues have not yet been finalized, contracts have not yet been signed and the conclusion of the transaction is still not certain," Deutsche Telekom said in a statement.

The company said it aimed to operate T-Mobile and MetroPCS within one company in which Deutsche Telekom would hold the majority of shares.

Dallas-based MetroPCS is the nation's fifth-largest cellphone company, behind Verizon Wireless, AT&T Inc., Sprint Nextel Corp. and T-Mobile, which would still be in the No. 4 position even if it successfully adds MetroPCS. MetroPCS didn't respond to a call for comment.

Last year, AT&T announced it had agreed to buy Bellevue, Wash.-based T-Mobile USA for $39 billion. But the deal was called off after running into opposition from government agencies that said it would create a less competitive wireless industry and potentially lead to higher prices for consumers.

Telecommunications analysts have warned that a deal between T-Mobile and MetroPCS would be logistically challenging. The companies use different network technologies, which prevents phones from one carrier from working on the other's network.

But the companies are deploying the same 4G technology, which would make the networks compatible, the Associated Press reported.

Craig Moffett, a telecommunications analyst at Sanford C. Bernstein & Co., said a deal "appears to represent an elegant exit" for MetroPCS, depending on the purchase price.

An agreement would also shake up the U.S. wireless industry, making it "much more bifurcated into high and low," Moffett said in a note to investors Tuesday. Sprint, caught in the middle, stands to lose from such a scenario.

"T-Mobile appears to be on a trajectory to consolidate the low end and dominate the prepaid segment in the U.S. Verizon and AT&T have the postpaid segment," he said. "Sprint has neither the cost structure to compete at the low end with T-Mobile, nor do they have the network to compete with [AT&T] and [Verizon] at the high end."

Shares of MetroPCS rose $2.05, or 17.8%, to $13.57.

andrea.chang@latimes.com

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