It’s quickly official: T-Mobile and MetroPCS agree to merge

group hug

Just one day after rumors of talks of a deal, T-Mobile and MetroPCS announced plans to merge. Details became available on Wednesday for a stock transaction, which is expected to complete in the first half of 2013, pending regulatory review and approval. The new company will be majority owned by Deutsche Telekom, which may reduce its holdings after the new entity goes public on the NYSE. The merger would a company with a combined 42.5 million subscribers, still behind, but closer to, Sprint and its 56 million customers.

From the press release, here are the financial details:

“The transaction is structured as a recapitalization, in which MetroPCS will declare a 1 for 2 reverse stock split, make a cash payment of $1.5 billion to its shareholders (approximately $4.09 per share prior to the reverse stock split) and acquire all of T-Mobile’s capital stock by issuing to Deutsche Telekom 74% of MetroPCS’ common stock on a pro forma basis.  Deutsche Telekom has also agreed to roll its existing intercompany debt into new $15 billion senior unsecured notes of the combined company, provide the combined company with a $500 million unsecured revolving credit facility and provide a $5.5 billion backstop commitment for certain MetroPCS third-party financing transactions. “

T-Mobile says the deal will help it transition to an LTE network faster due to the combination of spectrum and at least 20 x 20 MHz  coverage in many LTE areas. MetroPCS’s current customers will be transitioned to “a common LTE-based network as they upgrade their handsets,” suggesting that the new company will have legacy devices to support for some time.

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