T-Mobile US Inc. and MetroPCS Inc. (NYSE: PCS) have confirmed plans to merge operations to create a 42.5-million-subscriber wireless provider in the U.S.

The deal gives both companies, which will operate as separate units, a big push into 4G Long Term Evolution (LTE) in the future. Combining T-Mobile and MetroPCS's advanced wireless spectrum (AWS) will provide greater network coverage and a path to at least 20x20 MHz channels of 4G LTE in many cities. Existing MetroPCS customers will be migrated to a common LTE-based network as they upgrade their handsets.

MetroPCS currently has around 19 markets on LTE on much smaller and slower channels. T-Mobile was planning to intro the faster data service in 2013.

Under the terms of the deal, shareholders in MetroPCS will get $1.5 billion in cash and 26 percent ownership of combined company. Deutsche Telekom AG (NYSE: DT), which owns the larger T-Mobile USA unit, will get 74 percent ownership of the new operator.

The boards of both companies have approved the deal. The transaction is structured as a recapitalization, in which MetroPCS will declare a one for two 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 percent of MetroPCS's common stock on a pro forma basis.

Deutsche Telekom will also roll its existing inter-company 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."

The company will operate T-Mobile and MetroPCS as separate units, led by Jim Alling, currently chief operating officer of T-Mobile, and Thomas Keys, currently president and chief operating officer of MetroPCS, respectively. John Legere will serve as CEO of the combined company, J. Braxton Carter, currently chief financial officer and vice chairman of MetroPCS, will be the CFO.

The transaction is expected to close in the first half of 2013.

We'll have more on this story after the company's conference call later this Wednesday morning.

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— Dan Jones, Site Editor, Light Reading Mobile