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T-Mobile/MetroPCS Wants to be 4G 'Value-Leader'

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor

T-Mobile US Inc. and MetroPCS Inc. (NYSE: PCS) are describing their plan to merge as a move to create a 4G Long Term Evolution (LTE)-driven "value-leader" mobile operator to take on rivals in the U.S. (See T-Mobile, MetroPCS to Merge.)

The operators confirmed merger plans this morning. T-Mobile owner Deutsche Telekom AG (NYSE: DT) will pay $1.5 billion to MetroPCS shareholders and take a 74 percent ownership of the recapitalized company. MetroPCS will hold a 26 percent ownership. The two service providers will work as separate units but move to a common network infrastructure as soon as possible.

"We are here to compete, we are here to unlock value and we're here to win," trumpeted Deutsche Telekom CEO Rene Obermann on the conference call Wednesday morning.

4G LTE spectrum: A key driver
On the call it became clear just how important adding additional LTE spectrum is to both carriers. MetroPCS currently has 19 markets running 4G LTE in 2X5MHz channels. T-Mobile is looking to launch LTE services in 2013. (See Where Will T-Mobile Bring LTE First?.)

New T-Mobile CEO John Legere stressed that the deal would help the carriers combine 4G-capable advanced wireless services (AWS) spectrum licenses on the 1700MHz/2100MHz bands for more bandwidth for LTE services. This will mean 2x20MHz channels in many major areas.

"We will increase our contiguous spectrum for LTE by 40 percent," says Legere.

This comes on top of T-Mobile's 4G spectrum bonus following the breakup of the AT&T Inc. (NYSE: T) merger and its AWS swap with Verizon Wireless . (See T-Mobile Gets Spectrum in AT&T Breakup and 5 Ways the Verizon Spectrum Deal Could Affect You.) The plan for the companies is to start to move MetroPCS customers off that operator's PCS CDMA network in 2013 and onto T-Mobile's new LTE network on the AWS spectrum and its re-farmed 1900MHz HSPA+ 3G network.

"At the date the deal closes we have a series of great HSPA+ and LTE devices available immediately to MetroPCS customers," says Legere. "Our refarming and our rollout of LTE [on T-Mobile] will be perfect timing."

This seems to suggest that the T-Mobile LTE network will be up and running by the first half of 2013. Legere says that LTE deployment across the combined AWS spectrum will be completed by the end of 2015. Around that time, the MetroPCS CDMA network will be closed down and that spectrum re-farmed.

The Sprint-Nextel question
T-Mobile's Legere was keen to head off at the pass the idea that this deal is akin to the Sprint Corp. (NYSE: S) merger of 2005. That was widely regarded as a difficult merger as Sprint didn't have the push-to-talk walkie-talkie functionality on its network that Nextel supported and bled away enterprise customers who needed the capability as a result. (See Sprint, Nextel Confirm Merger.)

Legere jumped on the Sprint-Nextel comparisons several times on the call:

"I actually love the Sprint-Nextel analogy because it's a great opportunity to explain what this is not," says Legere. "Our strategy is to migrate the MetroPCS customers to the NewCo network and re-farm the MetroPCS spectrum, not try to smash together two separate technologies."

The finish line?
The deal has a six-month lockup and is expected to be completed in the first half of 2013, subject to regulatory approval. Deutsche Telekom CEO Rene Obermann described the lock as a "formality" a couple of times on the call Wednesday morning.

"I am usually a dry, non-humorous German, but this one I am very excited about," quipped Obermann.

For more

— Dan Jones, Site Editor, Light Reading Mobile

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