MetroPCS Communications Inc. (PCS) has finally received a favorable ruling by the Committee on Foreign Investment in the United States (CFIUS) regarding the combination of T-Mobile USA (a subsidiary of Deutsche Telekom AG [DTEGY]) with the former. This clears MetroPCS of all regulatory barriers.
CFIUS believes that the merger will not be a threat to the U.S. national security, giving clearance to the proposed deal.
Besides the FCC, the proposed merger has been approved by board of directors of both, MetroPCS and Deutsche Telekom. The deal will be sealed after MetroPCS shareholders’ approval through a meeting on Apr 12. It is expected to close in the first half of 2013.
Per the deal, MetroPCS will get a 24% stake in the combined company and Deutsche Telekom will get the rest. The transaction process of the deal could be viewed as recapitalization of MetroPCS.
The deal is expected to generate positive synergies for both the companies in terms of financial growth with estimated five-year CAGR for revenues, EBITDA and free cash flow in the range of 3%-5%, 7%-10% and 15%-20%, respectively.
Apart from financial benefits, Merger between MetroPCS and T-Mobile will boost their operation capabilities in the U.S. and will also offer strong resistance against the big industry players like AT&T, Inc. (T), Verizon Communications Inc. (VZ) and Sprint Nextel Corp.(S).
Currently, MetroPCS and T-Mobile have over 9 million and 33 million subscribers, respectively. This will form a subscriber base of more than 40 million for the combined company.
Further, the deal will also add to spectrum capacity and result in higher penetration of LTE networks that support speeds up to 20×20 MHz of 4G LTE in several regions. T-Mobile will be able to benefit from MetroPCS’ superior market position in no contract wireless services, while MetroPCS will gain from T-Mobile’s advance B2B services and Mobile virtual network operator (MVNO) platform.
MetroPCS has a Zacks Rank #3 (Hold).
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