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For T-Mobile USA the future is now – or more precisely, April 12. The U.S. telco has announced that it will finally offer the iPhone to customers that day. Coincidentally, on the same date shareholders of MetroPCS will vote on the merger with T-Mobile. The deal would result in T-Mobile being listed in the U.S. and its parent Deutsche Telekom owning 74 per cent of the combined business, with PCS shareholders holding the remainder.

It has been a rough ride for T-Mobile, the No. 4 U.S. wireless carrier, since antitrust regulators scuttled its sale to AT&T in late 2011. The respective transaction values show this. AT&T offered $39-billion (U.S.) for all of T-Mobile. Compare that to the combined enterprise value of T-Mobile/Metro, which is estimated to be about $30-billion. Now, in the hope of getting some traction, T-Mobile will charge the sticker price for an iPhone ($580) but will aim to have lower fees as well as no contract. Under some basic assumptions, it appears T-Mobile could save a customer about $500 over a two-year period.

It remains to be seen whether T-Mobile can execute a turnaround. The bigger question now is whether Deutsche cares to wait around to find out. After T-Mobile is listed, Deutsche can easily monetize its stake.

Two shareholders of Metro, however, have objected to the merger, citing tilted economics in Deutsche's favour. Deutsche will be a creditor of the company to the tune of $15-billion – about twice its equity in it. Conveying debt from Deutsche to T-Mobile disproportionately benefits the parent since Deutsche captures the commensurate gain to its own equity while its proportional loss at T-Mobile is shared with Metro shareholders (Metro's share price would accrete 70 cents for every $1-billion in debt Deutsche keeps on its books).

This does not mean that the merger is poorly constructed – but does call for extreme scrutiny of Deutsche's motivations.

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Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 0:32pm EDT.

SymbolName% changeLast
T-N
AT&T Inc
+0.28%17.6
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AT&T Inc 5.350% Global Notes Due 2066
-0.12%24.11

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