Deutsche Telekom Said to Sweeten Debt Terms of MetroPCS Bid

Deutsche Telekom AG (DTE) plans to offer a sweetened bid as soon as tonight for MetroPCS Communications Inc. (PCS), which the German company aims to merge with its T-Mobile USA division, a person familiar with the decision said.

The new terms will impose less debt on the combined company and have lower interest rates on the loan than the previous bid, said the person, who asked not to be named because the discussions are private.

The fresh offer would come two days before MetroPCS shareholders are scheduled to meet to vote on the original terms. Deutsche Telekom’s supervisory board held a meeting at its headquarters in Bonn today, another person said.

Under the merger plan, Deutsche Telekom and MetroPCS would combine the fourth- and fifth-largest U.S. wireless carriers, helping them compete against market leaders Verizon Wireless and AT&T Inc. The transaction has faced opposition from some of MetroPCS’s largest shareholders and investor advisory firms, which are concerned that the new company will be loaded up with too much debt.

Philipp Kornstaedt, a Deutsche Telekom spokesman, declined to comment on the sweetened bid, as did representatives from MetroPCS and T-Mobile.

Deutsche Telekom agreed in October to the original deal, which gives MetroPCS investors $1.5 billion of cash and a 26 percent stake in a new entity that’s taking on $15 billion of debt from Deutsche Telekom.

Photographer: David Paul Morris/Bloomberg

The silhouette of a customer browsing phones is seen in a MetroPCS Communications Inc. store in San Francisco. Close

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Photographer: David Paul Morris/Bloomberg

The silhouette of a customer browsing phones is seen in a MetroPCS Communications Inc. store in San Francisco.

Delayed Meeting?

Any revision to the terms would require postponing the date of the MetroPCS shareholder meeting, other people familiar with the matter said yesterday.

Deutsche Telekom is seeking to avoid a replay of T-Mobile’s failed deal in 2011, when AT&T walked away from a takeover. For Deutsche Telekom Chief Executive Officer Rene Obermann, the MetroPCS merger would be the largest acquisition since the German company entered the U.S. market more than a decade ago.

MetroPCS rose 3.3 percent to $11.56 in New York after news of an improved bid first surfaced. Deutsche Telekom climbed 2 percent to close at 8.61 euros on the Frankfurt exchange.

T-Mobile is struggling with contract-subscriber losses and has fallen behind rivals in embracing long-term evolution, or LTE, a faster network technology. Part of CEO John Legere’s strategy is to offer services, including LTE, at lower prices than competitors.

On April 12, T-Mobile will begin offering Apple Inc. (AAPL)’s iPhone for the first time, becoming the last major U.S. carrier to get the device.

The combination of T-Mobile and MetroPCS would create a company with 42.3 million customers. The deal moved a step closer to completion on March 12, when both the Federal Communications Commission and the Justice Department approved the combination. The following week, the Committee on Foreign Investment in the U.S. approved the deal.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net; Cornelius Rahn in Berlin at crahn2@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net

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