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UPDATE 2-Deutsche Telekom, MetroPCS to merge US mobile businesses

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FRANKFURT, Oct 3 (Reuters) - Deutsche Telekom and MetroPCS said they will merge their U.S. mobile operations to create a larger fourth-place player better able to compete with rivals.

The boards of both companies voted on Wednesday to approve the deal, which will see Deutsche Telekom hold 74 percent and MetroPCS 26 percent in the combined entity.

The merger marks a long-awaited consolidation in the U.S. mobile market, in which the fourth-largest mobile carrier Deutsche Telekom's T-Mobile aims to get the scale it needs to compete with AT&T and Verizon .

Last year, U.S. regulators scuppered a planned tie-up between AT&T and T-Mobile on the grounds it would have led to higher consumer prices and hurt competition.

The deal is effectively a reverse merger, in which smaller MetroPCS, which is listed in the U.S, will buy T-Mobile U.S. The companies said the deal would be "structured as a recapitalisation" in which MetroPCS will declare a 1 for 2 reverse stock split and make a cash payment of $1.5 billion to its shareholders.

The combined company, which will be called T-Mobile and led by current boss John Legere, will have 42.5 million subscribers and pro forma revenues in 2012 of $24.8 billion.

In contrast, third-largest operator Sprint had 56 million at the end of the second quarter, Verizon had 94 million while AT&T had 105 million.

Once Deutsche Telekom's strongest growth engine, T-Mobile USA has been losing customers to bigger and smaller rivals in recent years.

Braxton Carter, the current chief financial officer of MetroPCS, will become the CFO of the new company.

MetroPCS shares, which rose 17 percent on Tuesday after it emerged that talks were underway with Deutsche Telekom, were down 4.3 percent on the New York Stock Exchange.

Deutsche Telekom shares were up 1.23 percent at 1321 GMT, outperforming a flat German blue chip index in thin trading due to a bank holiday.

(Reporting by Harro ten Wolde in Frankfurt and Liana Baker in New York; Writing by Leila Abboud; Editing by Elaine Hardcastle and Jane Merriman)

((harro.tenwolde@thomsonreuters.com)(+49 69 7565 1271)(Reuters Messaging: harro.tenwolde.thomsonreuters.com@reuters.net))

Keywords: DEUTSCHETELEKOM TMOBILE/