MetroPCS Merger Puts T-Mobile in Strong Competitive Position
NEWS ANALYSIS: The T-Mobile and MetroPCS merger, which became official on May 1, creates a combined company with strength that far outweighs its size.When T-Mobile CEO John Legere rang the opening bell at the New York Stock Exchange on May 1, he signified more than a new listing—TMUS on the NYSE. Legere's bell ringing also opened up a new period of competition by a company that had always been the fourth-largest in the United States and by many measures was slowly shrinking. By combining with MetroPCS, the company has grown overnight to 43 million subscribers. But what's perhaps more critical, the company has added a significant amount of Advanced Wireless Service spectrum currently occupied by MetroPCS Code Division Multiple Access (CDMA) customers, but which will be converted to Long Term Evolution (LTE) spectrum for both companies. In the short term, T-Mobile will work to transfer existing MetroPCS customers to its network, but this won't be a quick process. MetroPCS plans to keep its existing customers on their current service for the immediate future, but will upgrade to phones that work on the T-Mobile when it's time for its customers to upgrade. T-Mobile customers won't see any differences, although eventually they'll see their access to LTE expand. But that's not all that will change. In an interview with CNBC immediately after the NYSE bell ringing, Legere said that he plans to grow the combined companies so that "No. 4 becomes No. 3." Clearly he has his sights set on financially struggling Sprint. He's also said that the merger with MetroPCS isn't the end of T-Mobile's growth plans.
Legere said he plans to bargain from a position of strength. By this he clearly was aiming his remarks at Dish Networks, which is currently in a battle with SoftBank to buy Sprint. But before Dish went after Sprint, the company held discussions with T-Mobile's owner Deutsche Telekom, only to be rebuffed until after the merger with MetroPCS had closed.