MetroPCS (PCS) Stock Soars on Possible Takeover
Shares of MetroPCS Communications Inc. (PCS: Charts, News) closed up +2.05 or +17.8 percent to $13.57 per share on Tuesday, after news that the company was in talks to be acquired by German telecom giant Deutsche Telekom AG (DB: Charts, News). Deutsche Telekom stated that some issues "have not yet been finalized" and that no decision on the deal had been made.
Deutsche Telekom already has a major presence in the U.S. cellphone market as parent company of the nation's fourth largest mobile phone service provider, T-Mobile USA. While the combination of T-Mobile USA and MetroPCS would still leave the resulting company still trailing Sprint Nextel (S
), the merger would make T-Mobile more competitive with leaders Verizon Wireless (VZ
) and AT&T (T
). Daily Chart
Richardson, Texas based MetroPCS Communications Inc. is the fifth largest U.S. mobile phone service provider with over 9.5 million subscribers. Combined with T-Mobile USA's 33.2 million subscribers, the resulting 42.7 million subscribers would still leave T-Mobile behind Sprint Nextel's 56 million subscribers. Leaders Verizon Wireless and AT&T have an estimated 105 million subscribers each. Sprint Nextel, the number three provider's stock plunged over 11 percent over the last two sessions to under $4.90 per share in part due to the increased pressure of keeping its industry position. Sprint is still recovering from buying Nextel in 2005 and needs to expand its customer base, most likely through another acquisition. The merger of T-Mobile and MetroPCS effectively limits Sprint's options further. The mobile phone provider resulting from the merger would need to consolidate the two different network technologies used by T-Mobile and MetroPCS. As the two networks are currently set up, a T-Mobil user would not be able to access the MetroPCS network and vice-versa. Nevertheless, both companies are using the latest 4G or fourth generation technology which could facilitate their consolidation. In 2011, AT&T had agreed to acquire T-Mobil for $39 billion, but the deal was canceled because of anti-trust issues. A deal between two smaller carriers such as MetroPCS and T-Mobile would concern regulators considerably less than the deal with AT&T. Some analysts have recently upgraded MetroPCS Communications rating from a hold to a buy. The analysts cited revenue growth, attractive valuation levels, income growth and the increase in the company's stock price over the last year as key factors leading to their recommendation. The company's latest quarterly earnings report showed net income had increased 76% over the same period one year ago to $148.84 million from $84.34 million, making the company even more attractive to potential suitors. With Tuesday's upward move - which saw the stock trade as high as $14.59 - MetroPCS stock is up more than 50 percent this year with its market cap of $4.28 billion rising to $4.9 billion after the rally. The stock was up an additional two percent in afterhours trading on Tuesday. The deal has not been finalized and a price for MetroPCS stock has not yet been determined. According to some sources, Deutsche Telekom's board was set to vote on the deal as early as today. The next day or two should give a clearer picture as to the details of the merger. Other News About PCS Sprint Behind as T-Mobile Talks to MetroPCS: Real M&A
Bloomberg article on the effects of the MetroPCS deal on Sprint. MetroPCS Communications Management Discusses Q2 2012 Results - Earnings Call Transcript
Analyst conference after the company's second quarter earnings release. Other Stocks in the News JPMorgan Rivals Face Billions in Damages After MBS Case
Rivals of the large bank face billions in government lawsuits over New York Attorney General fraud filing. A Stock You Can Go Nuts On
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Published on Oct 3, 2012
By Jay Hawk