On Tuesday afternoon, Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) talked about their plans to buy out prepaid cell phone company, MetroPCS, and merge it with T-Mobile USA. It’s part of the plan to increase their presence in the US market.
The new transaction terms indicate that Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) will own most of the shares from the new acquisition. Right now, nothing is set in stone and the companies are in talks. DT also stated that there may be some serious issues that have yet to be resolved. Negotiations are expected to be finalized by Wednesday.
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Last year, T-Mobile offered a $39 billion sale to AT&T Inc. (NYSE:T), but that deal was nixed, thanks to a significant opposition from antitrust regulators.
If this buyout proves to be successful, it will give T-Mobile a leg-up in the lower-price prepaid phone market. T-Mobile already has a line of prepaid phones, including Android and Windows-based phones.
On Tuesday, MetroPCS shares increased up to 18 percent, to $13.60, and a total value of $4.9 billion. This happened right after Bloomberg News shared the report of Deutsche Telekom’s plans.
At press time, neither company has made an official comment yet.
DT, which owns T-Mobile USA, is having a tough time competing with the likes of AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ). The company’s major rivals win the most customers thanks to better phones (like the iPhone 5) and faster data speeds. The second quarter of 2012 showed that they lost about 205, 000 subscribers, a number that was quadruple the amount since last year.
MetroPCS currently has 9.3 million customers, a nice number that would effectively boost T-Mobile sales, if they can keep the customers.
This buyout could be a good or bad move for Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY). On one hand, it would be ideal to buy out a company that already has a lot of subscribers, but on the other hand, if they can’t deliver the service for the price, they might make a lot of customers mad and send them running to their rivals.