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T-Mobile USA to combine with MetroPCS

A T-Mobile and MetroPCS merger would be complicated because they use different technologies; but they are now deploying the same 4G technology.

Photos by Associated Press

A T-Mobile and MetroPCS merger would be complicated because they use different technologies; but they are now deploying the same 4G technology.

NEW YORK — T-Mobile and MetroPCS have agreed to combine their struggling cellphone businesses in a deal aimed at letting them compete better with their three larger rivals.

The combined company will use the ­T-Mobile brand and have about 42.5 million subscribers. Although T-Mobile will stay number four among US wireless companies, it will get access to more space on the airwaves, a critical factor as cellphone carriers try to expand their capacity for wireless broadband.

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That could ultimately mean more choices and better services for customers, though Forrester Research analyst Charles Golvin does not believe the deal will make a ‘‘revolutionary difference’’ for US cellphone customers. That said, MetroPCS customers will probably have to buy new phones over the next three years as they are moved to T-Mobile’s network.

Both companies have faltered in the highly competitive US cellphone market led by Verizon Wireless and AT&T Inc. ­T-Mobile has 33.2 million subscribers, well behind number three Sprint Nextel Corp’s 56 million. MetroPCS is even further back, ranking fifth with 9.3 million.

Last year, T-Mobile USA’s German parent, Deutsche Telekom AG, tried to sell the US cellphone business to AT&T for $39 billion. Getting more access to airwaves was the main reason AT&T wanted T-Mobile. But regulators rejected that proposed deal, saying they were worried that competition would suffer if the second-largest cellphone company were to gobble up the fourth.

Under the new deal, Deutsche Telekom will hold a 74 percent stake in the combined company, while MetroPCS Communications Inc. shareholders will own the remainder. MetroPCS shareholders will also receive a payment of about $1.5 billion.

The deal still has to be approved by shareholders of both companies and will require government approval. But the regulatory concerns this time appear to be much milder than they had been with AT&T. T-Mobile and MetroPCS are both relatively small, and T-Mobile has been losing subscribers for the past two years.

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‘‘We are committed to creating a sustainable and financially viable national challenger in the US, and we believe this combination helps us deliver on that commitment,’’ Deutsche Telekom chief executive Rene Obermann said.

Deutsche Telekom said the combined T-Mobile-MetroPCS would have revenue of about $24.8 billion based on analysts’ estimates. The deal is also expected to lead to around $6 billion to $7 billion in combined savings.

The acquisition, scheduled to close in the first half of 2013, will probably affect MetroPCS subscribers the most. By the end of 2015, MetroPCS’s wireless network is expected to be shut down, and customers will be moved to the new company.

This means they will have to update their mobile devices at some point. But Golvin believes that is probably good in the long run, as customers will get more choices in picking out phones.

John Bergmayer, senior staff attorney for public-interest advocacy group Public Knowledge, said the merger will be good for consumers. “The two companies together are only going to be able to offer better service than they do today,’’ he said.

Representative Anna G. Eshoo, the ranking Democrat on the House subcommittee on communications and technology, said there’s a big need for a ‘‘strong national competitor’’ in the wireless marketplace when two companies — Verizon Wireless and AT&T — dominate the space.

Even if not stalled by regulatory hurdles, a linkup would nonetheless be complicated by the fact that MetroPCS and T-Mobile use different network technologies. That means MetroPCS phones would not work on T-Mobile USA’s network, and vice versa. However, both companies are deploying the same fourth-generation, or 4G, technology.

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