Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE), the parent company of T-Mobile USA is considering to improve its merger proposal for MetroPCS Communications Inc (NYSE:PCS) to obtain the approval of shareholders, according to report from Bloomberg citing two sources familiar with the issue.
Last month, the merger agreement between T-Mobile USA and MetroPCS Communications received its final regulatory approval from the U.S. Foreign Investment Committee.
Since last week, it has been reported that Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) is planning to offer a better deal to MetroPCS Communications Inc (NYSE:PCS). The company previously stated, “no comment as to possible changes to the terms of its agreement with MetroPCS and that it continues to believe its current proposal was in the best interests of shareholders.”
The German telecommunications company is currently reviewing the terms of its merger agreement with MetroPCS Communications Inc (NYSE:PCS). People familiar with the matter cited that Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) is planning to change the terms before the annual shareholders meeting of MetroPCS on April 12. The sources who provided the information requested not to disclose their identity because the ongoing negotiation is private.
Currently, Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) is monitoring the votes prior to the scheduled shareholders meeting. One of the strongest opponents of the merger is hedge fund manager John Paulson. His firm owns 36.3 million shares or 9.9 percent stake in MetroPCS Communications Inc (NYSE:PCS). Paulson argued that the merger agreement is unfair and it is not in the best interest of the shareholders.
He emphasized that MetroPCS will contribute 42 percent, but its shareholders will only receive $1.5 billion in cash and 26 percent stake in the combine company. In addition, he said that the combined company will be burdened with a tremendous debt approximately $23.2 billion including a $15 billion intercompany note held by Deutsche Telekom. Paulson also pointed out that the interest rate that will be paid by the combined company is too high.
T-Mobile USA is the fourth wireless carrier in the United States Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) aims to combine its subsidiary with MetroPCS in order to compete against AT&T Inc (NYSE:T) and Verizon Communications Inc (NYSE:VZ), the two largest wireless carriers in the country. At present, the German telecommunications company’s supervisory board is conducting a meeting regarding the possible amendment of the terms of its merger agreement.
If Deutsche Telekom decides to amend the terms of its merger agreement, the MetroPCS shareholders meeting will be postponed for another two weeks because the Securities and Exchange Commission (SEC) requires the filing of a new proxy statement.