German telecoms giant Deutsche Telekom (DT) has entered into discussions regarding a potential merger between its T-Mobile USA unit and Texas-based mobile operator MetroPCS, Bloomberg reports, citing people familiar with the matter. DT is believed to be considering a stock-swap transaction that would give the Germans control over the combined entity, which would then be publicly listed, although other options include an initial public offering (IPO) or an outright sale of T-Mobile USA. The source indicated that DT is also in talks with other, as yet unidentified, companies.
The rumoured deal has been greeted with scorn by both industry insiders and analysts, sceptical of the latest in a long line of dubious tie-ups. Most recently, in February 2012 Sprint Nextel pulled out of a USD8 billion deal to acquire MetroPCS over concerns about the asking price. Previously, in 2011 Sprint discussed buying T-Mobile USA, on the lookout for deals that would help it pose a more credible threat to bigger competitors Verizon Wireless and AT&T Mobility.
Any potential merger between T-Mobile and MetroPCS would offer something of a logistical nightmare; although they both utilise AWS spectrum, MetroPCS is a CDMA carrier while T-Mobile uses GSM technologies. Speaking to the Wall Street Journal, Sanford Bernstein’s Craig Moffett likened the proposed deal to ‘a baby’s head on a monkey’s body’.