T-Mobile + MetroPCS Is Good For Consumers

A MetroPCS (NYSE: PCS) and T-Mobile USA owned by Deutsche Telekom (NYSE: DTEGY) merger makes a lot of sense for the following reasons.  Here are 10 reasons this would be good for consumers.  

1. Keep the integrity of a discount carrier intact.  
2. MetroPCS has LTE spectrum that T-Mobile USA could use.
3. More purchasing scale 43M customers (MetroPCS 9M + T-Mobile 34M)
4. T-Mobile & MetroPCS have dead zone coverage gaps both can fill.
5. Consumer friendly unlimited data plans would likely continue at both companies. 
6. Fewer competing customers on a network = less data congestion.
7. Consumers might have the option of using a GSM or CDMA 3G phones.
8. T-Mobile HSPA+ 4G is very fast and the network is not congested.
9. MetroPCS 4G LTE is very fast and the network is not congested.
10. MetroPCS has been very aggressive using femtocell and DAS to improve coverage.

Deutsche Telekom is considering a stock swap transaction. However, I would support raising more capital in a T-Mobile USA IPO after the acquisition. MetroPCS shares jumped almost 30% instantly on the deal and currently has a market capitalization of around $3 billion.  MetroPCS seems to have plenty of cash in the bank of $2B and has annual revenue of approximately $5B.  So the combination would appear to be a strategy combining entities to have more scale for handset purchasing and spectrum allocation.  Considering the closest competitor is AT&T and Verizon who each have 90 to 100M+ subscribers.

MetroPCS has began deploying their LTE network before Verizon. MetroPCS is currently built around a CDMA 3G voice network and would be incompatible with T-Mobile’s GSM/HSPA network. However, in the future T-Mobile could use MetroPCS's LTE channels.  Reuters reported in an article "MetroPCS and T-Mobile are not a good technological or customer fit, one analyst said".   MetroPCS is a CDMA carrier in 3G and T-Mobile is a GSM carrier.  However, LTE is LTE and new handsets should be cross carrier compatible if the industry does the consumers right.

A combination of Leap Wireless 7M subscribers also makes sense in the future but right now LTE spectrum is more important to T-Mobile I would bet.

Related Articles:
Where is MetroPCS Expanding Coverage?

AT&T to FCC: "I Am Not A Crook"

AT&T continues to lie about the T-Mobile acquisition that should not be allowed.  Here are 5 lies from their merger submission to the FCC.     

#1) AT&T (NYSE: T) does not consider the current incarnation of T-Mobile USA to be a real competitor and points to smaller rivals like MetroPCS Communications (NYSE: PCS), U.S. Cellular (NYSE: USM), Leap Wireless (NYSE: LEAP),  Cellular South Inc. and Cincinnati Bell Wireless (NYSE: CBB), who combined have about 60% of T-Mobile USA’s customer base.  Read more.

#2) AT&T also claims to lack enough spectrum to launch UMTS in some markets. Spectrum shortage exaggeration.

#3) AT&T claims channel pooling for GSM services will increase capacity by as much as 15% in some areas.     How to relieve 3G data congestion.

#4)  T-Mobile's removal from the marketplace will not have a significant competitive impact.  AT&T says it is more focused on Verizon and Sprint than on T-Mobile USA, and AT&T too is seeing increased competitive threats from rapidly growing mavericks like MetroPCS and Leap and other providers.  Wireless competition

#5)  No mention of CDMA vs GSM handset competition

GSM CDMA Carrier Handset Competition Fair?

AT&T will soon consolidate T-Mobile and become the only GSM carrier in the US.  Tracfone is a pre-paid carrier that offers both GSM and CDMA so it doesn't really count.  Is this fair competition?  T-Mobile has been the only GSM alternative to AT&T and post-acquisition there will be none.  What happens to consumers who purchased GSM phones and want to move to another carrier?  What happens to the handset manufacturers around the World who want to sell their products in the US?  Why should consumers care about GSM?  If you travel internationally you will know what I am talking about.  GSM is the World standard for phones and allows you to travel in most countries around the World without buying a new phone.

Consumers will be facing very limited choices for wireless service in most regions. The result will be only two competing technologies (CDMA & GSM) that all wireless carriers use, all the small regional carriers have to negotiate roaming deals with either Verizon or AT&T if they want to offer full coverage to their customers. The deal would further entrench the playing field with one CDMA giant and one GSM giant and fair negotiations would be even harder.

Verizon is a CDMA carrier and Sprint operates iDen and CDMA phones that donot work in most countries when you travel around the world.   Smaller regional carriers MetroPCS, Leap, US Cellular and Tracfone all use  CDMA as well.  

US Wireless Subscribers Pie Chart Post AT&T & T-Mobile Merger

This is what the US wireless subscriber market will look like post an AT&T and T-Mobile merger.  Does this look like a pie chart that is promoting fair competition?  Is it fair that these two companies are the highest paying dividend stocks (5% annual) on Wall Street?   shareholder payout is approximately $10 billion dollars per year and the Verizon dividend is approximately $5 billion dollars per year.  Are our FCC and DOJ protecting us from the competition when the US is far behind the rest of the World with data speeds and connectivity?

If AT&T controls 130M customers and Verizon 102 million this will wipe out any ability for competition.  Sprint is already in trouble with its financial problems and will never be a formidable competitor. T-Mobile was actually starting to do some disruptive things to the largest two carriers Verizon and AT&T before the acquisition took place.  The technology disruption in using WiFi, 4G, and HSPA+ alone was enough to get AT&T to swoop in a buy the company to shut them up.   This chart alone should concern the Department of Justice when considering if there is fair competition in an already corrupt industry.  I will go on record to say that this merger will be the worst in US history for customers and competition if it goes through.  

Customer Churn: Coverage vs.Contracts

Contracts Reduce Customer Churn . . . Not Service

It has become fairly obvious that if AT&T's lost its' current iPhone or iPad exclusivity contract that they would suffer tremendous customer carnage.  Every person I speak with tells me that if AT&T didn't have them locked into a Blackberry or iPhone contract they would switch to another smaller carrier.  Unlike, Europe where you can purchase a phone 1st and pick a wireless carrier 2nd.  US customers are only offered subsidized phones that lock them into exclusive carrier contracts.  It's bogus in my opinion and should get more government regulation by the FCC who continues to be a pussy on this topic.