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Deutsche Telekom Secures U.S. Position With MetroPCS Deal

*from www.bloomberg.com, April 25, 2013 (To view original article click here.)

Take Away #1: Deutsche Telekom AG got a chance to stage a comeback in the U.S. after MetroPCS (PCS) Communications Inc. shareholders approved a sweetened deal to merge with the German company’s T-Mobile USA unit.

Key Facts and Figures:

  • Combining the fourth and fifth-biggest U.S. wireless companies creates a carrier with more than 40 million customers.
  • The merger would also give T-Mobile airwave licenses needed to offer fast services to rival AT&T Inc. (T) and Verizon Wireless.
  • The companies plan to close the deal May 1.

Take Away #2: For Deutsche Telekom CEO Rene Obermann, the transaction provides firmer footing for the U.S. business, which has lost 13% of its contract customer base between 2009 and 2012.

Key Facts and Figures:

  • The new T-Mobile will be publicly traded, facilitating an eventual withdrawl from the U.S., people familiar with Obermann’s plans have said.
  • “We’re very happy and also relieved that we finally got this solution,” Obermann said.
  • Obermann, after seven years as CEO, will be succeeded by CFO Timotheus Hoettges at the end of the year.
  • For Obermann, the deal was probably his last chance to a find a solution to the U.S. business that long eluded him.
  • A $39 billion deal to sell T-Mobile to Dallas based AT&T fell through in 2011 because regulators were concerned the combination would hurt competition.

Take Away #3: With T-Mobile USA’s fate clarified, Hoettges will have to divert less attention away from the carrier’s European markets.

Key Facts and Figures:

  • The European markets, where the economic crisis, rising competition and regulation driven price cuts, have caused revenues to decline.
  • In its home market, Deutsche Telekom is facing increasing pressure from cable companies such as John Malone’s Liberty Global Inc. (LBTYA).
  • Kabel Deutschland Holding AG, Germany’s largest cable company, has attracted interest from Liberty Global and Vodafone Group plc (VOD).
  • Deutsche Telekom rose 0.6% to 9.01 euros at 3:52 p.m. in Frankfurt.
  • MetroPCS, based in Richardson, Texas, advanced 0.3% to $11.81 in New York trading.

Take Away #4: Bowing to shareholder pressure, Deutsche Telekom on April 10 agreed to lower the size and interest rate of a loan to the joint company.

Key Facts and Figures:

  • The improved merger terms cut the shareholder loan to $11.2 billion from $15 billion and trimmed the interest rate by half a percentage point.
  • The improved terms won the endorsement of MetroPCS’s largest investor, Paulson & Co., as well as two shareholder-advisory firms in the run-up to the vote.

Take Away #5: The deal gives Deutsche Telekom a 74% stake in the merged entity and MetroPCS shareholders a $1.5 billion cash payment.

Key Facts and Figures:

  • Deutsche Telekom has agreed not to sell the shares for 18 months.
  • For Deutsche Telekom shareholders, the approval is “good news, because you could never really be certain until the last moment,” said Alexandre Iatrides, at Oddo & Cie.
  • Iatrides recommends buying Deutsche Telekom shares.

Take Away #6: T-Mobile has lagged behind peers in constructing faster networks and offering Apple Inc.’s iPhone.

Key Facts and Figures:

  • CEO John Legere is challenged with proving his strategy of scrapping long-term contracts will win contracts.
  • The carrier has earmarked network investments of $4.8 billion this year.
  • Last month, it switched on its own high-speed service using the long-term evolution technology.

Take Away #7: MetroPCS has been struggling to compete on its own.

Key Facts and Figures:

  • Yesterday, the company reported first-quarter earnings after the market close.
  • Net income fell 8% to $19.7 million, or 5 cents a share.
  • Revenue rose 1% to $1.29 billion, and the carrier added 109,000 new pay-as-you-go customers in the quarter for a total of 9 million subscribers.

Take Away #8: The pace of consolidation in the U.S. is picking up as investors focus on potential deals between Verizon and Vodafone, as well as Sprint and Dish Network.

Key Facts and Figures:

  • The future of Verizon Wireless has become a focus of investors as well.
  • Bloomberg News reported on March 5, that Verizon Communications Inc. (VZ) wants to buy out Vodafone’s stake in their partnership.
  • Vodafone’s 45% holding is worth about $115 billion, analysts said.
  • Dish Network Corp (DISH) last week offered $25.5 billion for Sprint Nextel Corp., the nation’s third biggest mobile-phone carrier.
  • Dish’s offer beats the terms offered by Japan’s SoftBank Corp. in October.
  • “Since there are two companies bidding for Sprint, one of them will be disappointed and may come back for T-Mobile,” Oddo’s Iatrides said.

*To view original article from www.bloomberg.com click here.

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