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The T-Mobile/MetroPCS Merger: An Unlikely Union

Yan Matusevich
5

We remember the failed AT&T/T-Mobile merger all too well. Hailed by government officials as a clear victory for American consumers, almost half a year has passed since and T-Mobile USA's future remains as bleak as ever. Less customers, less money flowing in and a sordid state of affairs in general. Deutsche Telekom, the German parent company of T-Mobile USA, seems to have finally had enough and is seriously considering an unorthodox merger with non other than MetroPCS (yeah, the company that is virtually unknown outside of America's urban centers). So is it an act of desperation or a genius move on T-Mobile's part?

Judging from the numbers, the T-Mobile/MetroPCS merger looks like ludicrous idea. With just 9.5 million subscribers, MetroPCS has less than one-third the amount of customers as T-Mobile. Hardly a "fair" match-up by any standards. Whereas T-Mobile has been pushing to unseat the Big Three (AT&T, Sprint, Verizon) on the US market, MetroPCS has contended itself with filling a niche market of mostly low-income customers from urban areas. Anyone from the NYC area will remember the massive MetroPCS ad campaign on public transit. But it seems like T-Mobile has simply run out of options in terms of potential partners for a merge and have settled on dealing with a relatively minor player like MetroPCS.

So what does T-Mobile stand to gain from such a deal? Some analysts would say it's all about acquiring more spectrum to lessen the strain on their network (and allow for faster data speeds and more customers). Yet wireless experts are quick to point to one major problem: T-Mobile and MetroPCS operate on totally incompatible networks (GSM vs. CDMA).

Different in size, incompatible networks, opposing target markets - what could possibly bring these companies together? Answer: Consumer disappointment with high-cost wireless plans. For the first time ever, the wireless industry has actually felt a slip in the number of contract subscribers. Though slight, there is a definite trend among consumers to ditch expensive phone plans in favor of smaller and more flexible providers. Remember how people turned to their local credit-unions in response to being fed up with the big banks? Something similar is happening in the wireless industry.

Fast-forward to the current merger talks and the picture becomes much clearer. MetroPCS offers affordable, competitive contract-free plans aimed towards low-income Americans (of which there are more and more in the current economy). For just $40 dollars, MetroPCS offers an unlimited calling, texting and data plan. Sure, the network can be a bit dodgy and their selection of phones is subpar. But that's exactly where a merger with T-Mobile could be a tremendous asset. Not only would it boost the network, but provide users with a larger selection of phones.

If this deal is done right, T-Mobile could potentially manage to keep its head above water (and save consumers money in the process). Regardless of the outcome, it is becoming evidently clear that telecos will need to move away from contract-based plans in the future or risk losing a sizible amount of subscribers.

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Comments

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  • Rastor May 11, 2012 Link

    MetroPCS has spectrum licenses, an LTE network, and millions of subscribers. T-Mobile wants more spectrum, to build out an LTE network, and more subscribers. Seems like a pretty obvious match to me.

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  • Yan Matusevich May 11, 2012 Link

    Agreed.

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  • CJ Brown Jul 29, 2012 Link

    (2 months later on commenting) T-Mobile would be smart to buy into MetroPCS since Credo + Boost + Cricket use Sprint's Network (& you know Sprint makes $ off this). It's that? Or merge with Virgin Mobile (sure they would have to figure out how to make incompatible networks (GSM vs. CDMA) compatible - but a stronger market - even if its offering more service to an Urban Market - isn't a bad thing) ....

    With Nevada's economy lingering into the toilet, more & more Nevada residents are looking into cutting costs by using MetroPCS - Credo - Boost - Cricket - Virgin Mobile (the service may not be 100%, but for $55 a month nobody is whining) ....

    Boost is currently offering an HTC EVO 4G (with ICS) for $299.99 (yes, I wish these companies had more & better smart phones available - I'd pay $299.99 vs the $199.99 currently offered for the HTC ONE S just to cut my monthly cellular bill in 1/2) ...

    I realize it may feel like 3G when the 4G Network isn't available in certain areas, but one has to ask .... what would you do to cut your bill in 1/2 - 1/3? I guess when you're living in an area that is struggling with the worst unemployment % (If you do find a job? you're not making what you used to), you will do EVERYTHING to cut costs ...

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  • Eric McBride Jul 30, 2012 Link

    Good point CJ. A lot of times it seems that you're often forced between choosing a good plan or a good phone. It's a totally different system in Europe that I WISH the US would adopt to!

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  • CJ Brown Jul 30, 2012 Link

    Its certainly make that HTC EVO V 4g from Virgin Mobile look like it could be my next Android Smart Phone (I'll suck it up & enjoy a contract free ice cream sandwich loaded product until the economy improves). The Htc Design 4g (Htc Evo) for Boost Mobile and the Htc Evo v 4g (Htc Evo 3D) from Virgin Mobile both have the same speed (1.2 Ghz Processor) ...

    http://www.virginmobileusa.com/shop/cell-phones/htc-evo-phone/features/


    For those who actually want an iPhone? Well, Apple is obviously panicking over a lack of sales & is offering an iPhone 4G @ Boost mobile (said to be debuting in late August) & now @ Virgin Mobile (if you want to shill out between $500 - $600 for a 3g smart phone (why oh why would anyone pay 3 times as much for a smart phone that's 3g?) ...

    http://www.virginmobileusa.com/shop/cell-phones/iphones/


    That HTC One V? its now available @ Virgin Mobile ($ 199.99) & comes with Beats Audio + already loaded Android OS 4.0, Ice Cream Sandwich (too bad its only a 3g model - unless you live somewhere that doesn't have 4g service, well then this Android Smart Phone would be the best you can get) ...

    http://www.virginmobileusa.com/shop/cell-phones/htc-one-v-phone/features/


    Yes Boost mobile and Virgin mobile are on the Sprint Nextel network (but both offer a $55 all unlimited plan + a $10 extra you can pay to prevent tethering if you are a data hog & that's going to be the selling point for me). People ask me "what would it take to get the major carriers to drop their prices?" I say "switch to an alternative carrier for a while"! If more Consumers did this? I believe our major Carriers would take the hint ...

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