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MetroPCS, Board Sued by Investor Over T-Mobile Combination

MetroPCS Communications Inc. and its board were sued by an investor claiming the company’s proposed combination with Deutsche Telekom AG’s T-Mobile USA fails to provide stockholders with adequate compensation.

Paul Benn, a shareholder in the mobile-phone company, argued the deal would give Deutsche Telekom an “unfair and unjustified windfall” and the directors failed their duty to get the best deal, according to a complaint filed today in Delaware Chancery Court in Wilmington. Benn seeks to represent all investors as a group.

Drew Crowell, a spokesman for MetroPCS, wasn’t immediately available to respond to a phone call and e-mail seeking comment on the lawsuit. T-Mobile USA media relations also wasn’t immediately able to provide comment.

After the proposed transaction is completed, Deutsche Telekom, Germany’s largest phone company, would own 74 percent of the combined company. MetroPCS shareholders would get the remaining 26 percent and a $1.5 billion cash payment, the companies said in an Oct. 3 statement announcing the deal.

The combined entity would keep the T-Mobile name and be run by John Legere, chief executive officer of T-Mobile USA, who took control last month.

Richardson, Texas-based MetroPCS jumped 18 percent the day before the deal was made public after Bloomberg first reported that the companies were close to a deal.

‘Negative Perception’

The company’s shares dropped 9.8 percent to $12.24 the next day after the transaction’s details were disclosed, “reflecting the markets negative perception of the grossly unfair terms” of the proposed deal, Benn said in court papers. Benn contends analysts were anticipating MetroPCS to get from 30 percent to as much as 38 percent of the combined entity.

T-Mobile, which had about 33 million customers at the end of June, will gain about 9.3 million MetroPCS customers, giving it about 42.5 million. That still leaves the company as the fourth largest U.S. carrier behind Sprint, which has about 57 million customers and Verizon Wireless and AT&T which have about 100 million apiece.

The case is Benn v. MetroPCS Communications Inc., CA7938, Delaware Chancery Court (Wilmington).

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