Metropcs Case Study Essay
Acquisition of Metro PCS by Deutsche Telekom AG (T-Mobile US, Inc.)
On Oct 3, 2012 acquisition of MetroPCS Communications Inc’s 74% stake by T-Mobile US, Inc, a subsidiary of Deutsche Telekom AG by $29 Billion provides MetroPCS' stockholders with an immediate $1.5 billion aggregate cash payment as well as an approximate 26% ownership stake in the combined company. It allows all MetroPCS stockholders to participate in the expected significant equity upside of the combined company.
Our valuation exercise leads to $3.04 per share of MetroPCS whereas it has been acquired at S4.05 prior to the proposed reverse stock split which justifies the premium paid projected cost synergies of $6-7 billion as net present value and annual run-rate cost synergies …show more content…
228 million are currently served with 4G and 200 million are expected to be covered with 4G LTE by the end of 2013.
• An enhanced spectrum position that will provide greater network coverage and deeper 4G LTE coverage in key markets across the country. Combining the two companies' spectrum provides a path to at least 20+20 MHz of 4G LTE in approximately 90% of the top 25 metro areas in 2014 and beyond.
Value Addition for Metro PCS
The combined company will be well-positioned to compete in future industry growth and consolidation as the leading value carrier in the U.S. wireless marketplace through its expanded scale, spectrum and financial resources. The combined company will directly benefit from its:
1) Strong financial profile:
• The combined company is expected to have BB S&P credit rating, which is two notches better than MetroPCS stand-alone and many peers
• Target five-year (from 2012 to 2017) compounded annual growth rates in the range of 3% to 5% for revenues, 7% to 10% for EBITDA and 15% to 20% for free cash flow;
• Projected cost synergies of $6-7 billion NPV, with an annual run-rate of $1.2-1.5 billion after an integration
On Oct 3, 2012 acquisition of MetroPCS Communications Inc’s 74% stake by T-Mobile US, Inc, a subsidiary of Deutsche Telekom AG by $29 Billion provides MetroPCS' stockholders with an immediate $1.5 billion aggregate cash payment as well as an approximate 26% ownership stake in the combined company. It allows all MetroPCS stockholders to participate in the expected significant equity upside of the combined company.
Our valuation exercise leads to $3.04 per share of MetroPCS whereas it has been acquired at S4.05 prior to the proposed reverse stock split which justifies the premium paid projected cost synergies of $6-7 billion as net present value and annual run-rate cost synergies …show more content…
228 million are currently served with 4G and 200 million are expected to be covered with 4G LTE by the end of 2013.
• An enhanced spectrum position that will provide greater network coverage and deeper 4G LTE coverage in key markets across the country. Combining the two companies' spectrum provides a path to at least 20+20 MHz of 4G LTE in approximately 90% of the top 25 metro areas in 2014 and beyond.
Value Addition for Metro PCS
The combined company will be well-positioned to compete in future industry growth and consolidation as the leading value carrier in the U.S. wireless marketplace through its expanded scale, spectrum and financial resources. The combined company will directly benefit from its:
1) Strong financial profile:
• The combined company is expected to have BB S&P credit rating, which is two notches better than MetroPCS stand-alone and many peers
• Target five-year (from 2012 to 2017) compounded annual growth rates in the range of 3% to 5% for revenues, 7% to 10% for EBITDA and 15% to 20% for free cash flow;
• Projected cost synergies of $6-7 billion NPV, with an annual run-rate of $1.2-1.5 billion after an integration