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: Charts, News), the merger would make T-Mobile more competitive with leaders Verizon Wireless (VZ: Charts, News) and AT&T (T: Charts, News). 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 Interesting article on nut company stocks. Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Oct 3, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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