NEW YORK T-Mobile and MetroPCS have agreed to combine their struggling cellphone businesses in a deal aimed at letting them compete better with their three larger rivals.
The combined company will use the T-Mobile brand and have about 42.5 million subscribers.
Although T-Mobile will stay No. 4 among U.S. wireless companies, it will get access to more space on the airwaves, a critical factor as carriers try to expand capacity for wireless broadband.
That could ultimately mean more choices and better services for customers, though Forrester Research analyst Charles Golvin doesn't believe the deal will make a "revolutionary difference" for U.S. cellphone customers. That said, MetroPCS customers will probably have to buy new phones at some point in the next three years as they are moved to T-Mobile's network.
Both companies have faltered in the highly competitive U.S. cellphone market led by Verizon Wireless and AT&T Inc. T-Mobile has 33.2 million subscribers, well behind No. 3 Sprint Nextel Corp's 56 million. MetroPCS is even further back, ranking fifth with 9.3 million.
Last year, T-Mobile USA's German parent, Deutsche Telekom AG, tried to sell the U.S. cellphone business to AT&T for $39 billion, but regulators rejected that proposed purchase.
Under the deal, Deutsche Telekom will hold a 74 percent stake in the combined company, while MetroPCS Communications Inc. shareholders will own the remainder. MetroPCS shareholders will receive a payment of about $1.5 billion.
The deal still has to be approved by shareholders of both companies and will require government approval. But the regulatory concerns this time appear to be much milder than they had been with AT&T. T-Mobile and MetroPCS are both relatively small, and T-Mobile has been losing subscribers for the past two years.
Deutsche Telekom said the combined T-Mobile-MetroPCS would have revenue of about $24.8 billion based on analysts' estimates. The deal is also expected to lead to $6 billion to $7 billion in combined savings.
The acquisition, scheduled to close in the first half of 2013, will likely affect MetroPCS subscribers the most. By the end of 2015, the MetroPCS network is expected to be shut down.