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T-Mobile Rising, Blue Skies Ahead Post Merger

|Includes: DISH, S, T, T-Mobile US, Inc. (TMUS), VZ

The recent T-Mobile and MetroPCS merger, the combined company to trade under ticker symbol TMUS on the New York Stock Exchange, brings the total number of subscribers to roughly 43 million for the company -- which means the newly-merged entity is still in fourth place. However, TMUS may not stay behind Sprint (NYSE:S), AT&T (NYSE:T) and Verizon (NYSE:VZ) Wireless for long.

BRINGING IT ALL TOGETHER

"The joined entity will operate under the T-Mobile brand, with plans calling for MetroPCS customers to be migrated over to T-Mobile's network by 2015. Once that's done, the spectrum previously devoted to MetroPCS' CDMA network will be repurposed to help build out T-Mobile's LTE network," writes the Verge. The change should be relatively painless. While the now-merged carriers had been using incompatible technologies, they both use the same 1700MHz AWS band. What's more, MetroPCS has a high handset turnover rate, with nearly two-thirds of its customers upgrading handsets each year. This means that with each upgrade, the company can move its users over to T-Mobile's network and, ultimately, shut down MetroPCS's existing framework.

"Turning off MetroPCS's network has major advantages: by not having to support two entirely different kinds of networks on the same bandwidth, the combined company can eventually devote most or all of its AWS spectrum to LTE - 20MHz of it in some locations, [T-Mobile senior vice president Brad] Duea points out, which is an extremely fat, fast data pipe," explains the Verge. "By comparison, neither Verizon nor AT&T have more than 20MHz of LTE spectrum active in any market, and each of those carriers has more than twice the number of subscribers that a merged T-Mobile-MetroPCS would."

SPECTRUM

Moreover, T-Mobile's recent failed deals have helped the wireless company build its network substantially. "With our breakup from AT&T, we got spectrum there. Then we did the Verizon deal, and that closed, so we got additional spectrum there. Then we did some swaps with Leap, so additional spectrum there. So that was over a 20 percent lift in spectrum. Then with our move with Metro, that deal closes, that's over a 40 percent lift in spectrum," explains Duea.

According to the Verge, "A 40 percent boost in available spectrum in a single year is utterly unheard of, particularly nowadays as data-rich smartphones choke networks and cause network operators of all shapes and sizes to fight over every scrap of spectrum they can find."

THE END OF CONTRACTS

So, we have a company that is positioned to over wide-spectrum and extremely fast LTE (made even faster by the broad network) -- and it isn't requiring contracts.

"T-Mobile is phasing out contracts and phone subsidies, and moving towards a monthly access charge model using unlocked, unsubsidized handsets," writes DailyTech. As of the end of 1Q13, the company "added 202,000 branded prepaid customers, which offset loss of 199,000 contract customers to make for a net gain of 3,000 branded customers. The branded growth was the first T-Mobile has seen since Q1 2009." The company also posted significant gains -- roughly 579,000 users -- in customer volume once prepaid users were factored in. In addition, "Postpaid (contract) customer churn (customer loss) was at 1.9 percent, the lowest level since Q2 2008. And postpaid customer losses were down 61 percent on a year-to-year basis."

CONCLUSION

Going forward, TMUS is looking pretty good. By 2015, this newly formed entity could be in a fantastic position to take over the mobile markets, or at least push up from fourth place. In fact, the merged company is looking so good that there are rumors "that Japan's fastest growing mobile carrier, Softbank Corp. (TYO:9984), is eyeing acquiring the resulting semi-independent T-Mobile USA and merging it with Sprint, if it can beat Dish Network Corp.'s (NASDAQ:DISH) rival bid for Sprint," says DailtTech. "While Softbank has yet to even win the acquisition of Sprint, the potential plan to merge America's third and fourth largest carriers is drawing buzz."

Either way, it is a win-win for investors willing to take a long position with TMUS.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.