T-Mobile USA sees three national networks emerging in long term

, Bloomberg

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T-Mobile USA, the fourth-largest U.S. mobile-phone operator, said an industry deal to reduce the number of nationwide wireless providers to three is likely "in the longer term" following regulatory shifts.

"Is it possible that four major players could go down to three?" Chief operating officer Jim Alling said in a speech today at a conference in Barcelona organized by Morgan Stanley. "I think that is possible, and likely in the longer term. I don't know how likely that is, based on the current regulatory environment" of U.S. President Barack Obama's administration.

Deutsche Telekom AG's attempt to sell T-Mobile USA to AT&T Inc. for $39 billion was thwarted last year as regulators were concerned that the combination would reduce competition. Deutsche Telekom, Germany's former phone monopoly, reached an agreement last month to merge the U.S. division with MetroPCS Communications Inc. to improve its scale and narrow the gap with Verizon Wireless, AT&T and Sprint Nextel Corp.

MetroPCS shareholders will probably meet in February or March to discuss approval of the deal, said Braxton Carter, the U.S. company's chief financial officer who's set to hold that job in the planned joint company. That time frame compares with a prediction by Deutsche Telekom chief executive officer Rene Obermann in October that investors in Richardson, Texas-based MetroPCS would agree to the deal as early as the end of 2012.

Under the merger agreement, Bonn-based Deutsche Telekom would hold a 74 percent stake in the combined U.S. operator, which would be publicly traded. The partners are targeting completion of the transaction by the end of June.

The parties will probably go through multiple rounds with the U.S. Securities and Exchange Commission that will include a review of pro-forma financial data of the merged entity, including purchase-price allocation adjustments, Carter said.

The joint company's earnings before interest, taxes, depreciation and amortization will probably be on the "upside" Carter said. The partners have forecast the venture will post average profit growth of 7 percent to 10 percent over five years and an Ebitda margin of 34 percent to 36 percent.

T-Mobile USA will take steps to halt departures of contract subscribers next year and post "moderate growth" in this higher-paying customer category in 2014, Alling said. T-Mobile lost 492,000 subscribers in the quarter ended Sept. 30.

The merged company, which will receive a $15 billion shareholder loan from Deutsche Telekom, plans to refinance the debt in the next several years, Carter said in an interview. T- Mobile will be able to spread out the refinancing over five years, he said.

Sprint last month was bolstered by Tokyo-based Softbank Corp., which agreed to pay $20 billion for a 70 percent stake in the carrier. Sprint will probably become more aggressive on prices for the handset it sells to clients, Alling said.

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