v2.5.97

T-Mobile customers increase, but they are the less profitable kind

T-Mobile USA reported on Thursday a slight gain in customers, but the growth came from less-profitable prepaid customers, which offset a loss in contract consumers. That meant operating income still fell by about 15% from the last quarter, showing why T-Mobile’s parent company, Germany’s Deutsche Telekom, is desperate for a partner.

T-Mobile, the fourth-largest US carrier, is slated to merge with Metro PCS, which is No. 5 in the US market. But the deal has faced opposition from shareholders, led by P Schoenfeld Asset Management, which owns about a 2% stake.

The asset management firm publicly said the transaction puts too much debt on Metro PCS, which means a bad deal for investors, and Metro PCS would be better off as a standalone company. Paulson & Co, led by hedge fund manager John Paulson, said it may join P Schoenfeld in its opposition to the deal.

Deutsche Telekom has been trying to get rid of its troubled US carrier as it also tries to stem its own losses. It reported a 13% drop in operating income Thursday. But the last effort to sell T-Mobile to AT&T failed after strong opposition from US antitrust regulators. Metro PCS has also sought partners, but talks with Sprint collapsed last year. Now Sprint is trying to buy its wireless partner Clearwire, but faces an opposing bid from Dish Network.

The past musical chairs in the US telecommunications industry makes it hard to predict whether any of these proposed deals will go through. But T-Mobile and Metro PCS should have clarity next month when Metro PCS shareholders are scheduled to vote on the deal.

Top News

Powered by WordPress.com VIP