Proposed T-Mobile Deal Heralds More Consolidation
11/16/2012| 07:06am US/Eastern
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BARCELONA, Spain--Further waves of consolidation are likely across the U.S. telecommunications market following the proposed merger between T-Mobile USA and its smaller rival MetroPCS Communications Inc.(>> MetroPCS Communications Inc), as wireless, satellite and cable companies all jockey for more scale in one of the world's biggest communications markets, T-Mobile USA said Friday.
T-Mobile USA, a unit of Deutsche Telekom AG, last month announced plans to merge with MetroPCS, in a deal that consolidates the U.S. market significantly, but still leaves T-Mobile lagging behind the three largest U.S. carriers in its number of subscribers.
The MetroPCS deal came after regulators last year shot down T-Mobile's planned $39 billion merger with AT&T Inc. after regulators balked at reducing the ranks of national carriers from four to three.
Some in the business think carriers are bound to keep trying, perhaps across multiple telecommunications sectors.
"We're of the opinion that down the road there will be more consolidation in the marketplace," said Jim Alling, the chief operating officer of T-Mobile USA, at the Morgan Stanley TMT conference Friday. "Looking not just across this, but also the cable and satellite industries, there could be some other things that could take place."
A merged T-Mobile and MetroPCS, majority owned by Deutsche Telekom's U.S. unit, would have about 42 million subscribers, behind Sprint Nextel Corp. with 56 million, and less than half the size of AT&T and Verizon Wireless, each with more than 100 million subscribers.
"Is it possible that four major players go down to three? I think that's possible in the longer term," said Mr. Alling, noting that the regulatory environment under President Barack Obama isn't likely to be friendly to such a contraction.
It was the first time since the deal was announced in October that executives of the to-be-merged companies addressed investors jointly.
MetroPCS financial chief Braxton Carter said he expected shareholders to back the deal with T-Mobile USA.
"This is the best transaction, this is the right transaction at the right time," Mr. Carter said.
Shareholders may gather as early as February, but more likely in March, to vote on the transaction, he added.
This is slightly later than expected. Initially, Deutsche Telekom said that MetroPCS shareholders will meet end of this year or beginning of next year.
The delay is due to expected questions by the U.S. Securities and Exchange Commission after filing the necessary proxy by the end of Friday.
"Realistically we will go through multiple rounds with the SEC," Mr. Carter said.
He was pretty tight lipped on the likelihood of a possible counterbid for the fifth-largest mobile carrier in the country.
"We have talked to multiple parties in the past," he said.
Earlier this year, the U.S. number-three provider, Sprint Nextel, was about to take over MetroPCS, but the deal collapsed over resistance in Sprint's board.
T-Mobile USA, for its part, is desperately in need of a deal. The smallest of the four nationwide carriers needs spectrum to roll out faster and more efficient fourth-generation networks, and to attack the market's bigger participants with aggressive pricing at a reasonable network quality.
Although, adding some customers in the third quarter on a net base, it continually loses more valuable post-paid subscribers as they can't offer a subsidized iPhone. Apple Inc." s must-have device is only available from T-Mobile's bigger peers.
T-Mobile's Mr. Alling admitted that the lack of having the new iPhone 5 in the handset portfolio affected business in the third quarter and will probably do so in the fourth quarter.
"We would love to carry the iPhone," he said, but he made clear that the "economies" with Apple have "to be right for us."
Write to sam.schechner@wsj.com and archibald.preuschat@wsj.com
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