T-Mobile US Inc is a wireless communications provider that offers wireless broadband mobile services under the T-Mobile and MetroPCS brands in the United States, Puerto Rico and the U.S. Virgin Islands.
After soaring yesterday on MetroPCS/T-Mobile reports, and rising more in premarket trading after the deal was announced, Leap Wireless (LEAP -15.4%) is more than giving back its gains, as investors conclude the deal's terms might not bode well for Leap. A downgrade to Neutral from JPMorgan also isn't helping: the firm doubts a suitor will arrive in the near-term, and calls Leap an "unattractive" target for Sprint (S +0.2%). MetroPCS (PCS -8.5%), meanwhile, has seen its losses steepen.
More on MetroPCS/T-Mobile: A CC is underway (live blog, webcast). The combined company will retain the T-Mobile name. $6B-$7B in cost synergies are targeted. T-Mobile USA CEO John Legere will head the company, and Deutsche Telekom will nominate board members. MetroPCS, which is announcing a 1:2 reverse stock split, will receive a $250M termination fee if the deal falls through. T-Mobile and MetroPCS have 42M combined subs right now, though that number is declining. PCS -4%.
More on the MetroPCS/T-Mobile USA merger: MetroPCS shareholders will get $1.5B in cash and a 26% stake in the combined company (MetroPCS closed with a $4.9B market cap yesterday), and Deutsche Telekom (DTEGY.PK) the remaining 74% stake. The deal is expected to close in 1H13. The WSJnotes the deal's reverse-merger structure could allow DT to gradually sell its stake and exit the U.S. market. PCS -2.1% after yesterday's big gains. LEAP +3.4%. S -1.2%.
Deutsche Telekom (DTEGY.PK) confirms it's in talks with MetroPCS (PCS +18.1%) about a merger with its T-Mobile USA unit, but adds major issues haven't been finalized. DT's board is expected to vote on the deal tomorrow. Some of the fallout: 1) Sprint (S -4.5%) is now widely expected to go after Leap Wireless (LEAP +13.6%) and its valuable spectrum. 2) The odds of a MetroPCS/Clearwire wholesale deal are now lower, and concerns exist a Sprint/Leap deal will diminish Clearwire's (CLWR -7.1%) value to Sprint.
More on Deutsche Telekom/MetroPCS: Bloomberg claims DT's board is set to meet tomorrow to approve the acquisition, and that an announcement could arrive the same day. David Faber reports the purchase will be an all-stock deal. MetroPCS (PCS +18.7%) has added to its gains.
MetroPCS (PCS +15.3%) and Leap Wireless (LEAP +15.1%) shoot higher after Bloomberg reports Deutsche Telekom (DTEGY.PK), parent of T-Mobile USA, is close to a deal for MetroPCS, long the subject of M&A speculation. Sprint (S -6.9%) and Clearwire (CLWR -4.1%) are selling off.
MetroPCS (PCS -1.6%) is "holding conversations with a number of strategic suitors," a source tells the FT, while cautioning the talks shouldn't be viewed as negotiations at this point. Shares are nonetheless trading lower, likely because M&A rumors (I, II) surrounding MetroPCS and fellow discount carrier Leap Wireless (LEAP -0.7%) are nothing new. Sprint (S), which reportedly came close to buying MetroPCS earlier this year, is said to be "not fully engaged" in conversations.
With Sprint (S) showing signs of improvement, analysts think the company could expand its customer base by acquiring a smaller rival such as T-Mobile (DTEGY.PK), MetroPCS (PCS) or Leap Wireless (LEAP) to create a strong no. 3 carrier to challenge AT&T (T) and Verizon Wireless (VZ). The stock's 136% YTD gain bolsters its currency for a deal.
Some of Wells Fargo's notes on Sprint (S +7.1%) CEO Dan Hesse's remarks: 1) Sprint expects to take part in industry consolidation because it "views itself as sub-scale" (compared with AT&T/Verizon, no doubt). 2) Hesse thinks it doesn't make sense for Sprint to raise prices while it has an LTE coverage disadvantage. 3) The recent jump in Sprint's Nextel retention rate is unlikely to last. 4) Smartphone sales are expected to continue lifting ARPU. CLWR +13%. PCS +5.2%. LEAP +1.7%.
Sprint (S +7%) and Clearwire (CLWR +8.3%) jump after the Street takes kindly to Sprint CEO Dan Hesse's Goldman conference remarks. Hesse forecasts "significant consolidation" will hit the U.S. mobile industry (previous); claims the carrier has doubled its retention rate for defecting Nextel subs as it prepares to shut down Nextel's network; and suggests Sprint is open to making spectrum purchases. M&A targets Leap Wireless (LEAP +2.5%) and MetroPCS (PCS +3.9%) are also higher.
FCC docs turned up two more 4G spectrum bands - the 800 MHz. and 1900 MHz. bands - in the North American GSM version of the iPhone 5 (previous) on top of the ones named by Apple. Their inclusion suggests spectrum-hungry AT&T (T) plans to launch 4G LTE services in those bands in addition to the ones it has promised to support. That, in turn, could be a sign Ma Bell is looking to ramp its 4G capex and/or acquire companies owning spectrum in those bands - could PCS or LEAP be targets?
Don't bet on a Sprint/T-Mobile merger happening, says Goldman. The combined company would own $35B in high-yield debt, the firm points out, and Deutsche Telekom (DTEGY.PK) might not be crazy about a deal that would face regulatory scrutiny and have a major equity component to it (ed: another hurdle is that the carriers run incompatible 3G networks). The firm thinks a Sprint (S) bid for MetroPCS (PCS - previous) or Leap Wireless (LEAP) is more logical. (Sprint CEO remarks)
RadioShack (RSH) and Leap Wireless (LEAP) unveil their long-rumored (I, II) prepaid mobile service. The service, which will rely on the RadioShack brand and initially feature two Huawei phones, offers 1,000 minutes for $35/month, and unlimited voice and 1GB of data for $50/month. MetroPCS (PCS) recently cut the price of its unlimited prepaid plan to $55/month. (PR)
Sprint's (S) marketing department continues promoting the carrier's cost advantage relative to AT&T and Verizon. Having long taken aim at Ma Bell and Big Red's data caps, Sprint's latest ad (video) skewers their expensive shared data plans. Sprint's Q2 subscriber data suggests its marketing efforts are starting to bear fruit, but it now has to contend with T-Mobile's revival of its unlimited data plan, and a price cut from MetroPCS.