(Adds analyst quote, share price update)
By Sinead Carew
NEW YORK May 1 T-Mobile US Inc shares
rose 6 percent in their debut on the New York Stock Exchange on
Wednesday, after the company was created by the merger of
MetroPCS Communications and Deutsche Telekom AG's
U.S. unit T-Mobile USA.
Shares of what is now the fourth-largest U.S. wireless
service provider were up 96 cents at $16.54 from an adjusted
closing price of $15.58.
MetroPCS and T-Mobile USA, which had combined 2012 revenue
of $24.8 billion, merged to pool their spectrum resources to
compete better with bigger and smaller rivals.
"It's a good debut," said Hudson Square Research analyst
Todd Rethemeier. "They both had good first-quarter results, so
we think there's more room for upside." Rethemeier set a price
target of $24 for the new stock.
However Wells Fargo analyst Jennifer Fritzsche was more
cautious because T-Mobile has been losing customers for a long
time. "T-Mobile US may have a difficult time turning the ship
and bringing customers back to it as quickly as hoped,"
Fritzsche said in a research note.
T-Mobile US said the combined company ended the first
quarter with about 43 million customers. This compared with
roughly 55 million for third-ranked Sprint Nextel.
While the company plans to shut down the MetroPCS network
eventually, it will keep both the T-Mobile brand and the
MetroPCS brand, which is targeted at cost-conscious consumers
who pay for calls in advance.
T-Mobile US Chief Executive John Legere said one of its
first priorities will be to expand the MetroPCS brand outside of
Because of the planned network shutdown, Chief Financial
Officer Braxton Carter said most of his savings target of $6
billion to $7 billion from the deal will not involve traditional
cost cutting such as layoffs. "There will definitely be some job
reductions," Carter told Reuters, but added that "overall there
will be job creation."
Deutsche Telekom has been struggling since 2011 to find a
better path for T-Mobile USA after abandoning a sale of the
company to No. 2 U.S. mobile provider AT&T Inc for $39
billion because of opposition from regulators.
The MetroPCS and T-Mobile USA merger was the first big deal
to close in an ongoing flurry of consolidation efforts by U.S.
telecom service providers.
Sprint agreed to sell 70 percent of its shares to Japan's
SoftBank Corp for $20.1 billion in October but is now
evaluating a counter bid from satellite TV provider Dish Network
Corp. Shareholders may vote on the SoftBank deal on
Some analysts have speculated that T-Mobile US could be
involved in other deals, such as a merger with Sprint, a tie-up
with Dish or a purchase of smaller rival Leap Wireless
Legere said he needs to focus on integration first.
"We will be listening to anybody that wants to talk to us,
but right now we've got all the cards we need to play
aggressively. So we're not out shopping," Legere said. "We're
about executing and integrating. We've got a pretty good hand."
Wells Fargo's Fritzsche said "Sprint and T-Mobile's eventual
marriage seems likely."
MetroPCS shareholders voted in favor of the deal on April 24
after Deutsche Telekom, under pressure from activist investors,
sweetened the terms.
Under the agreement, Germany's Deutsche Telekom owns 74
percent of T-Mobile US. MetroPCS shareholders received about
$1.5 billion in cash plus 26 percent of the combined company.
Other upcoming deals in the sector could include a Sprint
buyout of the rest of Clearwire Corp, in which it
already holds a majority stake. Sprint agreed to buy Clearwire
for $2.97 per share but minority shareholders have been betting
on a higher offer ahead of the May 21 vote on that deal.
Verizon Communications Inc, is also hoping to buy out
Vodafone Group Plc's 45 percent stake in their Verizon
Wireless venture and is preparing a $100 billion bid, according
to sources familiar with the matter.
(Reporting by Sinead Carew; Editing by Lisa Von Ahn, Jeffrey
Benkoe and Chris Reese)