Deutsche Telekom’s T-Mobile USA and MetroPCS have announced plans to merge, with DT owning 74% of the combined company and MetroPCS the remaining 26%.
The deal will strengthen T-Mobile’s position in the US, increasing total subscribers by 28% to 43 million and increasing market share from 10% to 13%.
More importantly the deal would strengthen their position in the value segment where both companies are focused, with the new company having 23% of the US prepaid market, given T-Mobile USA’s share of 20% and MetroPCS with 3%.
T-Mobile USA has made it clear the deal is all about LTE, with the combined spectrum assets of the companies providing a path to 2 x 20MHz for LTE in many markets, double T-Mobile USA’s current plans for 2 x 10MHz for LTE.
In addition T-Mobile USA says MetroPCS customers will be upgraded from CDMA to a common LTE network as they upgrade their handsets, highlighting plans for a rapid migration from CDMA to LTE.
This reduces but does not eliminate one of the major challenges of the deal which is T-Mobile USA will have to migrate two major technology families – CDMA and WCDMA – to LTE rather than just one.
At the same time, it will have to refarm (transition) its combined spectrum holdings from CDMA and WCDMA to LTE. This all adds up to a hugely complex and challenging migration that will take significant time and investment, and which is a major risk for derailing the benefits of the deal which the companies say includes $6-7 billion in expected cost savings.