T-Mobile and MetroPCS Announce Pending Merger – Now What?

Ever since AT&T abandoned its bid to buy T-Mobile USA, Inc. in December, 2011 due to regulatory challenges, there has been widespread speculation that there was still room for another consolidation in the lower tier of wireless carriers in the U.S. market.  With T-Mobile’s more than 33 million subscribers and MetroPCS’ nine plus million subscribers, the two carriers will still not have half as many subscribers as either AT&T or Verizon individually.   To have a better chance of being competitive with the dominant carriers, both of whom have their 4G network upgrades well underway, T-Mobile and MetroPCS have little choice, but to be acquired or merge.

While not yet approved, the merger between T-Mobile and MetroPCS it is not expected to face the same regulatory challenges with the failed AT&T acquisition of T-Mobile.  Regulatory approvals can be expected to take many months, but if and when approved, the T-Mobile and MetroPCS will have plenty of technological and logistical challenges.  There also exists the possibility that Sprint may make a bid for one or both of the companies as it is a distant third to AT&T and Verizon.  Until the FCC approves the merger and both boards sign the closing documentation, nothing is final.

From a technological standpoint, T-Mobile and MetroPCS use two different network technologies.  T-Mobile uses a GSM technology while MetroPCS uses CDMA technology.  So the merged T-Mobile MetroPCS entity has similar hurdles as those faced during the 2005 Sprint Nextel merger.  That stated, almost seven years later, with new 4G technology and a roadmap of what not to do from the Sprint Nextel merger, radio frequency engineers expect that network integration will be less onerous than prior mergers, especially if the T-Mobile MetroPCS merged entity abandons CDMA in favor of the GSM.  The primary question will be how long T-Mobile and MetroPCS take to effectively execute the integration or, if the CDMA network is abandoned, how long customer migration from MetroPCS to T-Mobile takes in a post merger world.  If history is any indicator, Sprint has only recently begun decommissioning its iDEN Nextel network, however, most analysts are predicting a complete cutover to the T-Mobile network by the end of 2015.

If and when the merger obtains all necessary regulatory and shareholder approval, and the final i’s are dotted and t’s crossed of the merger documents, the new T-Mobile MetroPCS entity, which is expected to keep the T-Mobile brand, will no doubt begin reviewing their coverage maps and more than 40,000 combined cell sites.   Both T-Mobile and MetroPCS sites will be reviewed for overlap to find synergies.  This is a multi stage process from coverage review to lease review to possible lease termination.

If you have a cell site lease with T-Mobile or MetroPCS, or both, the fate of those sites will likely not be determined until late 2013 and in many cases, beyond.  In the near term, we expect this announcement to have an impact on lease buyouts, the extent of which will take some time to be fully seen.  However, if you have been contacted by a lease buyout company to purchase your cell site lease in the past, and you do have a T-Mobile or MetroPCS cell site lease, we anticipate that you will be contacted again to revisit the sale of your lease(s).  Before agreeing to any lease buyout terms, which may include a reduced purchase price offer, we recommend that you consult with a professional with expertise in the business.

Years after the T-Mobile MetroPCS merger is finalized, we anticipate the merged T-Mobile entity to contact most of their landlords to determine if those land owners will agree to rent reductions and other more favorable terms for T-Mobile in a post merger world.  To stay ahead of the curve, this is a good time to revisit your lease agreement to strategize on how best to preserve the rental income.  Before agreeing to any new terms with the T-Mobile MetroPCS merged entity, please do not hesitate to contact us to discuss possible options and whether such rent reduction and/or lease modification is right for you.

Please note that “T-Mobile” is a registered trademark owned by T-Mobile USA, Inc. and “MetroPCS” is a registered trademark of MetroPCS Wireless, Inc.  Cell Tower Attorney is not affiliated with T-Mobile or MetroPCS in any way and the above article is offered strictly as an opinion.

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