April 1, 2023

DealBook: Sprint Shares Fall on Report of Possible Counterbid for MetroPCS

Customers lined up to purchase an iPhone at the Sprint store in San Francisco.Eric Risberg/Associated PressCustomers lined up to purchase an iPhone at the Sprint store in San Francisco.

4:50 p.m. | Updated

If Sprint Nextel is seriously weighing a counteroffer for MetroPCS, its shareholders didn’t appear particularly enthusiastic — at least at first.

Shares of Sprint closed down 2.1 percent in trading on Thursday, after Bloomberg News reported that Sprint was weighing a potential challenge to T-Mobile USA’s proposed merger with MetroPCS. The deliberations are at an early stage, according to the news report.

Strangely enough, MetroPCS shares didn’t immediately receive the customary rise that accompanies speculation that another suitor may emerge. Soon after the report, they were down 2.6 percent. The shares, however, rallied late in the trading day, and closed up 3.7 percent, at $12.69.

A spokesman for Sprint declined to comment.

If MetroPCS were to complete its merger with T-Mobile, it would bolster the strength of its business as it battles with larger rivals like Verizon Wireless and ATT. Moreover, it would leave Sprint with few options if it wants to grow through acquisitions, something that the company’s chief executive hinted at last month.

Sprint has been hunting for additional wireless spectrum as it builds out its Long Term Evolution service, which would provide the high data speeds used by the latest generation of smartphones. Many analysts had seen MetroPCS as a good complement, given its abundance of network capacity and its use of the same CDMA cellphone technology.

Sprint and MetroPCS nearly merged earlier this year, in a stock-and-cash deal that was scuppered at the last minute by Sprint’s board.

Industry bankers have said that Sprint may make another run at the company it left at the altar. There aren’t exceptional restrictions preventing such a move: MetroPCS would owe T-Mobile’s parent, Deutsche Telekom, a $150 million breakup fee if it accepted a deal from another suitor.

But some in the industry expressed skepticism that Sprint would be able to carry out a deal it had already walked away from, despite the benefits that a merger with MetroPCS would bring.

“This deal is substantially more complicated than what was contemplated six months ago, and Deutsche Telekom still wanted to go forward,” one person close to MetroPCS told DealBook on Wednesday.

Article source: http://dealbook.nytimes.com/2012/10/04/sprint-shares-fall-on-report-of-possible-counterbid-for-metropcs/?partner=rss&emc=rss

DealBook: T-Mobile Seals Deal With MetroPCS

A T-Mobile store in New York.Mark Lennihan/Associated PressA T-Mobile store in New York.

The parent company of T-Mobile USA agreed to buy MetroPCS on Wednesday, as the cellphone providers looked to compete with bigger rivals.

The merger is aimed at making T-Mobile a more robust competitor to Sprint Nextel, particularly in low-cost cellphone service. The deal will also help T-Mobile gain more customers and resources to build out a next-generation data network.

Under the terms of the complex transaction, MetroPCS will conduct a 1-for-2 reverse stock split and pay out $1.5 billion in cash to its existing shareholders, or about $4.09 a share. It will then issue new stock worth about 74 percent to T-Mobile’s parent, Deutsche Telekom, leaving existing MetroPCS investors with a 26 percent stake.

Related Links

“The T-Mobile and MetroPCS brands are a great strategic fit – both operationally and culturally,” René Obermann, the chief executive of Deutsche Telekom, said in a statement. “The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate.”

The cellphone carrier is bulking up in the face of increased competition. The combined company, which will be named T-Mobile, will have nearly $25 billion in revenue and $6.3 billion in profit. T-Mobile expects to wring out $6 billion to $7 billion in cost savings.

CLOSING THE GAP If the parent company of T-Mobile USA buys MetroPCS, the combined unit would have the fourth most cellular subscribers.
Rene Obermann, chief of Deutsche Telekom.Oliver Berg/DPA, via Agence France-Presse — Getty ImagesRené Obermann, chief executive of Deutsche Telekom.

More important, T-Mobile will add to its customer base. With 42.5 million users, the combined company will close the gap significantly with Sprint, the No. 3 player with 56.4 million customers.

T-Mobile and MetroPCS will continue to operate as separate brands.

Throughout the morning, T-Mobile executives sought to allay one of the biggest concerns about the merger, the incompatibility of the company’s network with MetroPCS’ own. John Legere, who will become the chief executive of the combined network operator, argued that the company will slowly move MetroPCS’ customers to its own GSM standard — with the goal of moving the unified entity to the Long Term Evolution technology down the road.

The aim was to avoid comparisons to Sprint’s merger with Nextel, which failed at the same task and left that merged company in a far weaker position.

“This is not a replay of a debacle that we’ve seen in the past,” he said on a conference call with analysts. “We will not smash together two networks with differing technologies.”

Morgan Stanley and Lazard advised Deutsche Telekom. Legal advice was provided by Wachtell, Lipton, Rosen Katz; Cleary Gottlieb Steen Hamilton; KL Gates; and Wiley Rein.

MetroPCS was advised by JPMorgan Chase, Credit Suisse and the law firms Gibson, Dunn Crutcher; Paul Hastings; and Telecommunications Law Professionals. A special committee of its board was advised by Evercore Partners and the law firms Akin Gump Strauss Hauer Feld and Fulbright Jaworski.

Article source: http://dealbook.nytimes.com/2012/10/03/t-mobile-seals-deal-with-metropcs/?partner=rss&emc=rss

AT&T’s Next Move May Be Asset Sell-Off

ATT and T-Mobile’s corporate parent, Deutsche Telekom, acknowledged that the deal was in trouble in a Thanksgiving Day announcement. The companies said they had withdrawn, for now, their application to the Federal Communications Commission to join their cellphone operations. They also said that ATT would take a $4 billion charge against earnings — the amount in breakup fees owed to Deutsche Telekom if the deal is scrapped.

The companies portrayed the withdrawal of the F.C.C. application as a tactical move, after the commission chairman said earlier in the week that he would move to oppose the deal. The Justice Department filed an antitrust suit to block the merger in August.

Focusing on the antitrust trial, scheduled for February, the companies explained, would now be the first step. They vowed to continue to pursue their bold plan to combine the second- and fourth-largest cellphone carriers in the United States.

But the companies’ ambitions must be scaled back if they want any chance at a deal, analysts say. To address the objections of the Justice Department and F.C.C. that a merger would be anticompetitive, ATT could agree to sell off 40 percent or so T-Mobile’s assets to wireless rivals, they say.

The policy goal, analysts say, would be to strengthen wireless competitors beyond the big two, Verizon Wireless and ATT. So sales of mobile spectrum, cell towers and customers could not be made to Verizon, but to others, like Sprint and MetroPCS, the third- and fifth-largest carriers.

Or perhaps assets could be sold to a well-heeled foreign company that, unlike Deutsche Telekom, is increasing its investment in the United States: América Móvil, headed by the Mexican billionaire Carlos Slim Helú. Mr. Slim is a major shareholder in The New York Times Company.

Creative deal-making, analysts note, would be required to forge alliances and supply cash for spinoff purchases. The list of potential participants, they say, includes private equity firms, like SilverLake Partners, and cable companies, like Comcast and Time Warner, which own spectrum and whose Wi-Fi networks can work in tandem with cell networks.

Each of the options would present obstacles. And it is not clear that ATT would be interested in a drastically scaled-down deal. Yet the company has consistently argued that its main motivation for pursuing T-Mobile is to acquire scarce wireless spectrum, so ATT can quickly build out high-speed, next-generation network capacity to improve its service.

“If that is its goal, then ATT has to explore ways to salvage as much spectrum out of the deal as it can,” said Kevin Werbach, an associate professor at the Wharton School of the University of Pennsylvania and a former technology policy official at the F.C.C.

To sell off 40 percent of T-Mobile’s assets, ATT would most likely have to make peace with rivals who have opposed the merger, like Sprint and MetroPCS, and offer these carriers favorable terms, said Kevin Smithen, an analyst at Macquarie Securities.

“The issue for ATT is whether gaining some market share and spectrum is worth handing over some of T-Mobile’s assets to the struggling third and fifth carriers,” Mr. Smithen said.

Private equity firms, analysts say, would mainly be interested in providing financing for others to buy spectrum assets, or in buying some assets and then reselling them. Such investment funds, they add, are not in the business of running companies.

América Móvil in Mexico is a candidate to buy T-Mobile assets, according to Berge Ayvazian, a telecommunications consultant. The company’s TracFone unit, which sells a flat-rate, prepaid service called Straight Talk, has been rapidly adding subscribers in the United States.

“The result,” Mr. Ayvazian said, “would be a healthy company that is growing around the world and in the United States, becoming the No. 4 competitor in this market.”

But other analysts noted that América Móvil, with its prepaid service, is a very different business than the traditional model of signing up subscribers on two-year contracts.

Article source: http://feeds.nytimes.com/click.phdo?i=5803c03b74b84fe4881711532f193b94

Will Consumers Benefit if T-Mobile Stands Alone?

But a big question, industry analysts say, is whether the mobile industry will be genuinely more competitive and innovative with T-Mobile as a stand-alone company.

The two biggest carriers, analysts note, are gaining subscribers, while their smaller national rivals, Sprint Nextel and T-Mobile USA, a unit of Deutsche Telekom, are losing ground.

“The gap between the haves — ATT and Verizon — and the have-nots, which is essentially everybody else, is only getting wider,” said Kevin Smithen, an analyst for Macquarie Securities.

Craig Moffett, an analyst at Sanford C. Bernstein, agreed, saying: “This market is going to consolidate one way or another.”

But in taking action, the Justice Department is making a bet that this is not necessarily the case. And its analysis concluded that the anticompetitive risk of allowing ATT to reduce the ranks of the four largest carriers — which provide more than 90 percent of mobile wireless service in the country — to three was too great.

Wireless looks to be the communications and computing technology of the future, as sales of smartphones and iPads surge and people increasingly use them for sending and receiving messages, reading, and playing games. Competition among mobile carriers, then, is clearly important to both consumers and the economy.

But even if the deal goes through, other forces could eventually shake up the tiny club of large wireless companies. There are upstart carriers, led by MetroPCS, which offer discount service and prepaid plans, enjoy strong positions in some local markets and have national ambitions. A specialist company, LightSquared, is selling capacity on its high-speed wireless network at wholesale rates to niche carriers.

The Federal Communications Commission has begun prodding broadcasters to free up wireless spectrum, opening up more potential opportunities for newcomers to the market. And powerful companies like Google, Apple and Microsoft, with deep pockets and a stake in mobile computing and communications, could also step in and change the game, analysts note.

The mobile market is “a fast-shifting chessboard these days,” said Kevin Werbach, an associate professor at the Wharton School of the University of Pennsylvania and a former counsel for new technology policy at the F.C.C.

“If the ATT merger with T-Mobile fails,” Mr. Werbach added, “it will shuffle the pieces still more.”

Yet the Justice Department was faced with a decision about the near-term impact of a huge merger, rather than one about the possibility of new entrants or new technology stimulating competition years down the road.

ATT had argued that adding T-Mobile would give it the extra network capability it needed to fairly quickly roll out the next generation of high-speed service — so-called 4G — across the nation.

The Obama administration has championed the accelerated rollout of faster wireless service as an important foundation for innovation and future growth. But the administration’s antitrust regulators decided there were other ways for ATT to do that without taking out a competitor.

For one, the company could just invest in expanding its own network. Another approach, analysts say, is network-sharing arrangements with T-Mobile and other carriers. That way, rivals avoid the redundant investment of building cell towers side by side. But the companies remain separate and still compete on service in those markets.

“Network-sharing arrangements are common in some European markets,” said Jan Dawson, an analyst at Ovum, a technology research firm. “You get some of the same benefits, without running into the kind of antitrust concerns ATT has with T-Mobile.”

T-Mobile USA’s German corporate parent wants to get out of the United States, and concentrate its resources elsewhere. But the unit’s assets — its wireless spectrum and network of cell towers — could be sold off to others who might sustain a fourth national competitor, like cable, satellite or technology companies that want to offer wireless service, according to some analysts.

The potential for bigger wireless bills for consumers if T-Mobile was acquired by ATT, legal experts say, was a crucial part of the Justice Department’s analysis. T-Mobile offers smartphone service with voice and data plans that, in some markets, are cheaper than ATT by 20 percent or more. Lower prices are the most easily measured consumer benefit of competition, and in merger cases, the government typically looks at the potential for price increases of 5 percent to 10 percent or more as significant.

ATT has some sought-after offerings that T-Mobile does not, like Apple’s iPhone. But, according to the Justice Department, ATT’s prices would have been higher without the competitive pressure from T-Mobile.

ATT, when advocating for the deal announced in March, repeatedly said that the merger should be judged not by the impact on market share nationally, but by the impact on local markets, where there are often smaller, regional competitors.

In its complaint and supporting documents, the Justice Department said it had examined local markets carefully. In more than half of the 100 larger markets, for example, the T-Mobile-ATT combination would have more than 40 percent market share.

In its way, the government complaint tells a story, portraying T-Mobile as a particularly important competitor. With its pricing plans, T-Mobile has led in making smartphone service affordable to a mass market. T-Mobile, the government states, was an early adopter of smartphones that used Google’s Android operating system.

“The picture presented is that T-Mobile is not just any competitor, but a ‘maverick,’ in the term of art used in antitrust,” said Andrew I. Gavil, a professor at the Howard University law school. “So if it’s acquired, you remove a disruptive, innovative force from the marketplace.”

Article source: http://www.nytimes.com/2011/09/01/technology/can-t-mobile-carry-on-as-stand-alone-company.html?partner=rss&emc=rss