The stock price of T-Mobile USA, Inc. (TMUS), the newly-formed public company combined from the merger of T-Mobile USA and MetroPCS Communications Inc (NYSE:PCS) soared during its first day of trading on Wednesday.
T-Mobile USA, Inc. (TMUS) Share Prices Soared On First Day
T-Mobile USA, Inc. (TMUS) rose to $16.39 per share from the previous closing price of MetroPCS at $11.84 per share on Tuesday, April 30. The upturn demonstrated that the newly combined company is gaining the confidence of investors.
Matthew Niknam, an analyst at Goldman Sachs, started covering T-Mobile US (NYSE:TMUS) and recommended a buy rating for stock with a $22 price target. He believed that Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE), the parent company of T-Mobile USA, will be willing to sell its position in the combined company due to the fact that deal-making in the wireless industry in the United States is intense.
The merger of T-Mobile USA and MetroPCS Communications Inc (NYSE:PCS) experienced some opposition from shareholders particularly from hedge fund manager John Paulson who vocally said that the reverse merger was unfair to MetroPCS shareholders.
In order to get the approval of shareholders and complete the transaction, Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) improved its offer. The board of directors of MetroPCS Communications unanimously approved the new deal and the majority of its shareholders including Paulson supported it.
John Legere, president and chief executive officer of T-Mobile US (NYSE:TMUS) said, “The combination of T-Mobile and MetroPCS Communications Inc (NYSE:PCS) creates an even stronger disruptive force in the U.S. wireless market. Together, as America’s Un-carrier, we’ll continue our legacy of marketplace innovation by tearing up the old playbook and rewriting the rules of wireless to benefit consumers.”
The board of directors of T-Mobile USA, Inc. (TMUS) is composed of 11 members including two directors from MetroPCS Communications. Tim Höttges, the current deputy CEO and chief financial officer of Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) will serve as chairman of the board.
Höttges said, “By uniting T-Mobile and MetroPCS, we have created a dynamic new player in the wireless industry that has the right strategy and management team in place to compete successfully in today’s marketplace. We look forward to realizing the tremendous potential of the new T-Mobile.”
MetroPCS Communications agreed to a 1 for 2 reverse stock split wherein it acquired all of T-Mobile’s capital stock from Deutsche Telekom AG (FRA:DTE) (PINK:DTEGY) (ETR:DTE) in exchange for its 74 percent common stock. Its shareholders received a cash payment of $1.5 billion or approximately $4.05 per share to the reverse stock split.
Based on the 2012 results of the two companies, T-Mobile USA, Inc. (TMUS) would have $24.8 billion of revenue, $6.4 billion of adjusted EBITDA, $3.7 billion of capital expenditures (excluding spectrum purchases)and $2.7 billion of free cash flow. It has approximately 43 million customers as of March 31, 2013 with two strong brands. Its target compounded annual growth rates within the next five years are in the range of 3 percent to 5 percent for revenue, 7 percent to 10 percent for EBITDA, and 15 percent to 20 percent for free cash flow.