T-Mobile MetroPCS Merger Plans Blocked By Shareholders

In early October, T-Mobile announced plans to merge with prepaid wireless provider, MetroPCS. Although these plans brought up many questions among existing customers and techies, both companies believed they were “made for each other.” In fact, the deal was to be the saving grace for two struggling wireless carriers. Combining forces would mean 40 million subscribers, with added scale, spectrum and resources, while retaining the T-Mobile brand. At the time of the T-Mobile MetroPCS merger announcement, T-Mobile was not forthcoming on details, except to say that T-Mobile is in the process of launching their LTE service and would, over time, repurpose MetroPCS’ existing spectrum to work with both the LTE and HSPA+ services. This simply means they would replace MetroPCS’ existing CDMA network with the T-Mobile GSM network and the AWS spectrum. Additionally, T-Mobile was unclear on whether it would retain the MetroPCS prepaid options and if unlimited data plans would be offered. They did, however, confirm plans to better serve the marketplace with a selection of competitively priced plans, including pay-as you-go, no contract plans, contract plans, SIM-only plans, and broadband service.

Perhaps the merger announcement came a bit prematurely, albeit optimistically. When the announcement was made earlier this month, merger plans had yet to be approved by shareholders, nor had regulatory approval been received. Now, the T-Mobile/MetroPCS merger might not happen at all, if shareholders have their way.

MetroPCS Shareholders File Suit to Block Merger

Just two weeks after the initial announcement, MetroPCS shareholders have filed a lawsuit to block the merger. The shareholders allege that MetroPCS is being undervalued, and that this attempt at recapitalization for T-Mobile leans too far over the edge in favor of T-mobile, is dictated by the board and management with little input from shareholders, and inevitably shorts shareholders on the compensation due to them. Tainted with conflict and provisions that favor Deutsche Telekom, T-Mobile’s parent company, and structured in a way that seems to discourage bids from other potential buyers, shareholders have asked for an injunction to prevent any merger in the near future. While no hearing date has been set, the plaintiffs are seeking declaratory relief, based on claims of breach of fiduciary duty and unjust enrichment, among other claims.

[Image via t-mobile]