FCC approval sets precedent for telecoms M&A
New York, US (PRWEB) April 11, 2013
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The merger between T-Mobile USA and MetroPCS – the fourth and fifth placed wireless service providers in the US – has been approved by the Committee on Foreign Investment (CFIUS) this week, setting new precedents for telecoms mergers.
The approval from CFIUS was the final regulatory hurdle that the deal needed to clear, having gained approval from the Justice Department and the Federal Competition Commission (FCC). The deal will see T-Mobile USA’s parent company, Deutsche Telekom, take a 74 per cent stake in the new company, with MetroPCS shareholders owning the remaining 26 per cent.
The deal will become final if MetroPCS shareholders have voted on the matter at a meeting to be held next month. Despite the successful granting of regulatory approval for the deal, the matter of the MetroPCS shareholder could still prove to be a point of contention, however, with some significant shareholders understood to still be hesitant about it. The MetroPCS board is said to have unanimously recommended that shareholders vote their shares FOR all of the proposals, but the largest MetroPCS shareholder – billionaire John Paulson – has been vocally opposing the deal. Despite MetroPCS mailing a letter to all of its shareholders claiming that the merger is the best strategic alternative, Paulson has maintained that Deutsche Telekom is getting a better deal than MetroPCS shareholders. As part of the deal, MetroPCS will declare a 1-for-2 reverse stock split and pay a special dividend to its shareholders, totaling some $1.5 billion.
The vote is scheduled to take place at a Special Meeting of shareholders on April 12.
There was some surprise expressed at the FCC’s decision not to apply significant conditions to its approval. Some 62 House Democrats had signed a letter to the FCC urging it to force T-Mobile to commit to “preserving US jobs” before giving its consent to the landmark deal.
For its part, T-Mobile has said that it is committed to adding more than 1,000 new jobs in its B2B division. Company spokesman, Timothy O’Regan, said that the merger would put them in a better position to compete with the three bigger national telecoms competitors, Sprint Nextel Corp, AT&T Inc, and Verizon Wireless.
He explained, “The combination of T-Mobile USA and MetroPCS will create a stronger company with the goal of emerging as the country’s leading value carrier, providing much needed competition against the larger established players in the wireless business.”
The approval of the deal has also raised reservations from other quarters, regarding its effect at a grass-roots level. Telecommunications policy experts at The Greenlining Institute claiming that FCC should have given greater consideration to community input and should impose greater conditions on the new company.
The Greenlining Institute policy director for Telecommunications, Stephanie Chen, said that it could have serious effects on vulnerable communities.
“It’s worrisome that a matter of such importance was decided at the bureau level, without a vote by the full Commission,” she explained. “We are troubled that the Commission took a pass on fully evaluating a transaction that could result in inferior service quality for low-income consumers, reduce employment and franchise opportunities, and reduce or eliminate T-Mobile’s commitments to diversity. We hope the FCC isn’t establishing a pattern of giving a free pass to future transactions that could harm communities of color and low-income communities.”
The potential success of the merger comes just a year after Deutsche Telekom’s attempt to sell T-Mobile USA to AT&T for $39 billion was thwarted by regulators, who said that it would limit competition in the mobile wireless market and result in rising prices.
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