MetroPCS Climbs on Speculation Sprint May Counterbid
Shares of MetroPCS (NYSE: PCS) have added better than three percent on Friday after an analyst at Guggenheim Securities said that Sprint Nextel (NYSE: S) may counterbid for the company after it agreed to merge with T-Mobile USA. Shing Yin said in a report that Sprint could bid $12 to $13 for MetroPCS.
The stock is currently trading at $10.50. T-Mobile is a unit of Deutsche Telekom AG and under the terms of the deal, the German parent company will hold 74 percent of the combined entity and pay MetroPCS $1.5 billion in cash.
According to Bloomberg, if the Deutsche Telekom deal goes through, the combined entity would have around 11.7 percent of the U.S. wireless market. Currently, Sprint is the third-largest provider, with 15.2 percent of the market.
The largest carriers in the United States are AT&T (NYSE: T) and Verizon (NYSE: VZ) which have a combined 58.5 percent of the wireless customers in the United States. According to Yin, if Sprint does indeed make an offer for MetroPCS, it could be difficult for Deutsche Telekom to match.
“To counter a $13 per share bid from Sprint, if that were to occur, we estimate DT would have to give 43 percent to 47 percent of the combined company to PCS shareholders -- likely a tough proposition for DT shareholders to accept,” Yin said in an e-mail. Yin added that the reason why Sprint already hasn't stepped up is because the company may be looking at alternative transactions.
Particularly, he thinks that Sprint may be interested in a deal with Clearwire (NASDAQ: CLWR). Currently, Sprint is Clearwire's largest investor and customer. That stock has soared almost 9 percent on Friday on the speculation sparked by Yin.
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