MetroPCS Climbs After Company Reports on Pre-Merger Talks

MetroPCS Communications Inc. climbed today after saying it held deal talks with at least eight companies before agreeing to a merger with T-Mobile USA, raising the possibility that a counteroffer may surface.

The Richardson, Texas-based company released a filing on the afternoon of Nov. 16 describing a frenzy of deal discussions leading up to the merger agreement with T-Mobile and its parent company, Deutsche Telekom AG. One of the unnamed suitors, referred to as “Company G,” offered $13.39 a share in cash and stock before backing away from the bid in February. People familiar with the matter have identified Sprint Nextel Corp. as the company bidding for MetroPCS at the time.

Sprint, the third-largest U.S. wireless carrier, has considered making a counteroffer to the T-Mobile bid, people familiar with the situation said last month. The company will probably study the filing for insight into the T-Mobile-MetroPCS deal, said Walt Piecyk, an analyst with BTIG LLC in New York.

“The filing could provide Sprint more details to consider whether to launch a competitive bid for MetroPCS,” Piecyk said in an e-mail.

MetroPCS shares rose 2.2 percent to $11 today in New York, bringing its year-to-date gain to 27 percent. The stock jumped as much as 5.9 percent during the trading session.

Merger Terms

Deutsche Telekom announced plans on Oct. 3 to merge MetroPCS with its T-Mobile USA division. Under the deal, Deutsche Telekom will hold 74 percent of the merged business and pay MetroPCS shareholders $1.5 billion in cash. The combined entity will keep the T-Mobile name and be run by John Legere, the former chief executive officer of Global Crossing Ltd., who took charge of T-Mobile USA in September.

Bill White, a spokesman for Overland Park, Kansas-based Sprint, declined to comment on the filing, as did MetroPCS and T-Mobile.

Before the agreement was reached, MetroPCS also discussed a range of transactions with a party called “Company C,” which a person familiar with the matter says is Dish Network Corp., the second-largest U.S. satellite-TV provider. In August, the satellite company offered $11 a share for MetroPCS, including about $1.2 billion in cash. MetroPCS turned down the bid, according to the filing.

Leap Combination

MetroPCS and Deutsche Telekom also discussed doing a three-way merger with another party, described in the filing as “Company E.” That company was Leap Wireless International Inc., one of MetroPCS’s competitors in the pay-as-you-go wireless market, according to a person with knowledge of the negotiations.

After conversations with this company, MetroPCS CEO Roger Linquist and the board decided the talks were unlikely to be productive and could complicate the Deutsche Telekom negotiations, according to the filing.

Along the way, MetroPCS considered deals to buy more wireless airwaves from other companies. In March 2011, MetroPCS met with senior executives from “Company D” about acquiring spectrum or possibly all of the business. That party was Clearwire Corp., a person familiar with the matter said.

Clearwire, a money-losing company that’s attempting to build a nationwide wireless network, has been under pressure from investors to sell some of its unused spectrum. Discussions with MetroPCS continued until at least June 2012, though they didn’t lead to an agreement, according to the filing.

Back to Sprint

As talks with Deutsche Telekom advanced, MetroPCS continued to view Sprint as the most likely company to provide a competing bid. Sprint, described as Company G, rekindled talks with MetroPCS in August. That month, Sprint said President Keith Cowan, who handled strategic planning for the carrier, would be stepping down. A senior executive from Sprint told T-Mobile that the reasons why the deal hadn’t proceeded earlier in the year were no longer applicable. Company G indicated that it was considering another bid, according to the filing.

On Oct. 15, Softbank Corp. agreed to buy a stake of about 70 percent in Sprint for $20.1 billion. The Japanese company will pay $12.1 billion to Sprint shareholders, and the deal includes $8 billion of new capital. That has provided Sprint will funds to make its own acquisitions.

Sprint also has seen its stock more than double in value since the February MetroPCS talks. The shares rose 1.3 percent to $5.55 today.

According to the filing, a senior Company G executive indicated in October that his company was still considering a bid for MetroPCS and that if the T-Mobile deal moved forward, “he hoped any breakup fee payable by MetroPCS to pursue an alternative transaction would be reasonable.”

Under its deal with Deutsche Telekom, MetroPCS would pay $150 million if it backs out of the arrangement. The reverse breakup fee for T-Mobile is $250 million. Bonn-based Deutsche Telekom is prepared for a counterbid from Sprint and would consider better terms if necessary, a person familiar with the matter said in October.

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