MetroPCS unopposed to a combined AT&T, T-Mobile

While Sprint (NYSE:S) is decrying AT&T’s (NYSE:T) proposed acquisition of T-Mobile (NYSE:DT), claiming it will marginalize all other operators (Unfiltered: Sprint makes its disapproval of AT&T-T-Mobile deal official) apart from AT&T and Verizon Wireless (NYSE:VZ, NYSE:VOD), the country’s largest Tier II operator doesn’t have a problem with it. According to MetroPCS (NYSE:PCS) chief operating officer Tom Keys, “too big” is a relative term when you’re operator of 8 million customers staring down giants.

From Metro’s perspective, the leading operator having 100 million customers versus having 80 million customers makes little difference, Keys said. In fact, Keys sees the acquisition giving Metro a competitive advantage. It not only would knock one of the Big 4 operators out of the business, but it would also remove the one nationwide operator with the most similar market focus to Metro’s, Keys said. T-Mobile has always targeted the lower-end of the postpaid market and the prepaid markets—Metro’s sweet spot. If T-Mobile were swallowed up by AT&T, that could leave 34 million abandoned customers, many of whom are ripe for Metro’s plucking.

“We think this is a one-and-one-makes-less-than-two situation, as it knocks another competitor out of the market,” Keys said. “We think this is a really good time for Metro to put our head down and get down to business.”

T-Mobile has distinguished itself from its larger rivals by offering cheaper voice plans and mobile data packages, which MetroPCS can either match or undercut. T-Mobile’s sizable and growing prepaid base also matches up well with Metro’s core contract-less service. Given the long approval process AT&T must go through to close the deal—it’s estimating a year—and the even longer integration process after the deal closes, T-Mobile could face a long period of turmoil. Prospective customers may be reluctant to sign up with an operator whose basic pricing structure and plans might change. Current customers may not embrace AT&T’s different and often pricier data plans as their contracts expire. New options like the Apple (NASDAQ:AAPL) iPhone could keep many of them on board, but just as many might flee to other operators.

“We think there’s a 12-to-24 month jump ball for T-Mobile’s customers,” Keys said. MetroPCS is hoping a good deal of them will lob that ball into Metro’s court. But Keys sees other possible benefits for Metro in the deal. If it closes, Metro would become the fourth largest operator in the U.S. Though it would still be tiny compared to the top 3, it could command considerably more respect from the industry and its suppliers. “We very well could get a brighter light shown on us and a sharper focus from our infrastructure vendors,” Keys said. “There would be one less operator for them to focus on.”

Getting attention from vendors hasn’t been too big a problem for Metro. It was the first to deploy a commercial long-term evolution (LTE) network in the U.S. using Ericsson (NASDAQ:ERIC) and Samsung gear. Samsung also built the industry’s first LTE handsets specifically for Metro’s Advanced Wireless Service (AWS) frequencies. But with one less Tier 1 operator to content with, MetroPCS could get access to a richer variety of devices. AT&T and T-Mobile will most likely cull through their combined portfolios, leaving some device makers searching for other distribution channels. Metro might even get access to the device exclusives it’s been barred from due to its size.

Finally MetroPCS might even be able to grow its footprint and its network if the acquisition goes through. A deal this size would certainly require AT&T to divest spectrum and networks in several markets as AT&T would possess well over 100 MHz of AWS, PCS, 700 MHz and cellular spectrum nationwide. In particular, the combined operator would be top heavy at AWS and PC, where both operators today currently overlap. Those two bands also happen to be where Metro runs its CDMA and LTE networks.

Keys wouldn’t speculate on what divestitures the Justice Department and FCC may force AT&T to make, but he said Metro would definitely welcome the opportunity to add licenses in its current markets. “We’re opportunistic when it comes to spectrum acquisition,” Keys said.
See also:

AT&T: T-Mobile deal would produce a bigger, better operator ultimately benefiting consumers
CTIA: Sprint's Hesse weighs in on AT&T-T-Mobile deal
AT&T-T-Mobile deal -- and others to come -- shows need for order orchestration
CTIA: Can T-Mobile's dual-carrier HSPA+ match Verizon's LTE?
AT&T buys T-Mobile in blockbuster wireless deal