MetroPCS Communications Inc (NYSE:PCS) shares fell by more than 2 percent today after the company’s board recommended a merger deal that would see the company become part of the Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) family. The merger was unanimously supported by the board who recommended that shareholders vote in favor of the deal. The story is just part of the slew of M&A activity in the wireless market today.
Earlier it was revealed that DISH Network Corp (NASDAQ:DISH) had made an unsolicited bid for Sprint Nextel Corporation (NYSE:S) offering around $25 billion for the company. Late last year Japanese firm Softbank agreed to acquire Sprint for around $20 billion though that deal has not closed yet.
Clearwire Corporation (NASDAQ:CLWR), a company that agreed to an acquisition deal with Sprint Nextel Corporation (NYSE:S) on completion of that company’s acquisition, received an offer for its spectrum from Verizon Communications Inc. (NYSE:VZ). It has been a busy day in the carrier world, and the MetroPCS Communications Inc (NYSE:PCS) has added to the flurry of activity.
The terms of the new merger deal, which would see MetroPCS merge with T-Mobile, would see the debt burden on the company reduced by $3.8 billion to $11.2 billion and the interest rate on that debt halved. The merger would also carry with it an eighteen month lock up period in which Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) would not be allowed to sell its stake in the company.
Many shareholders, including hedge fund manager John Paulson have voiced their support for the new deal already. The support of the company’s board provides an added impetus to shareholders to accept the deal. That is no guarantee of success however, and the challenges faced by this deal so far suggest that it may be difficult to close, despite regulatory approval.
MetroPCS Communications Inc (NYSE:PCS) will, under the terms of the Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) deal, see 74 percent of its equity transferred to the German company while 26 percent of the equity stays with current shareholders. The company’s debt burden will be reduced, and shareholders will receive $4.09 cash per share.
The wireless market in the United States is in a period of transition right now. The many twists and turns along the road have made some investors suspicious of the market. It’s clear that there is money to be made in the market, and with the headline pressure in the wireless arena, investors ahead of the pack are surely pleased.