MetroPCS is headquartered in Texas and currently has 9.3 million customers located primarily in 13 metropolitan areas. Leap Wireless followed higher as well, on speculation that it may also become in play soon.
T-Mobile is the largest postpaid carrier not offering the Apple (AAPL)
When comparing the major carriers, T-Mobile ranks first as the value price leader. Even with such competitive pricing, T-Mobile needs to do more soon. T-Mobile needs to address subscriber losses or it runs the risk of losing critical mass. To remain profitable, it is important to have the highest possible density of customers. After fixed costs are met, each additional revenue dollar falls almost directly to the bottom line. Adding an additional low-cost provider appears to be complementary for both T-Mobile and MetroPCS. While it would appear that a competitive advantage could be gained by combining networks, I will describe why this deal is unlikely to happen.
If we search back to the failed AT&T
T-Mobile and AT&T also share the same type of network and have roaming agreements. The synergies and cost efficiencies with merging T-Mobile into AT&T would have saved build-out costs for AT&T. No such cost savings is obvious with T-Mobile and MetroPCS.
T-Mobile and MetroPCS use two incompatible systems with which to deliver calls. This problem alone should be a deal killer. However, even if the companies are crazy enough to merge, don't expect much more than a Frankenstein result. We have seen this plot played out before. The main characters were Sprint and Nextel then. If any lesson was learned, Sprint proved that some things just shouldn't be combined.
Sprint or Verizon
Using a more conservative number of 20 times earnings, we arrive near $15 a share. With the recent weakness in MetroPCS, many shareholders may not get too excited with an offer of only $15 per share. There are too many problems with this deal to seriously believe it is going to happen. There are regulatory, valuation, technical, and timing issues to overcome, and each is a potential show stopper. As a result, if you're thinking of buying MetroPCS in hopes of making a fast buck, you may find yourself standing without a chair when the music stops playing.
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