In response to growing resistance among MetroPCS shareholders and advisors to a merger with T-Mobile USA, parent company Deutsche Telekom has offered to lighten the debt load for the new entity.
Under a revised proposal, the debt carried by T-Mobile and MetroPCS combined would be cut by $3.8 billion, to $11.2 billion. Reuters reports that the reduction in debt, excluding the interest-rate change, improves the deal’s valuation by about $2.67 a share for MetroPCS shareholders.
Deutsche Telekom also cut the interest rate payable on the loans by 50 basis points.
“I think the revised offer is enough to win majority approval,” said Kevin Roe, a Roe Equity Research analyst quoted in the Reuters report.
Sweetening the deal still further, Deutsche Telekom has expanded the period it is prohibited from publicly selling shares in the company from 12 months to 18 months after the deal closes.
What does not change is the original equity-split proposal slapped down on the table by Deutsche Telekom. The German company still wants 74 per cent, leaving MetroPCS shareholders with the remainder (and $1.5 billion in cash).
Deutsche Telekom has reportedly said this is its “best and final offer”.
The revised proposal comes after PSAM, a significant MetroPCS shareholder, lobbied hard against the original terms. Institutional Shareholder Services, a proxy company that advises large shareholders, also spoke out against the spectre of heavy debt.
Deutsche Telekom had of course previously tried to offload its struggling US subsidiary by selling it to AT&T, but that deal was blocked by regulators.
A merger with MetroPCS, however, offers the chance for T-Mobile to mount a stronger challenge against its larger national rivals – AT&T, Sprint and Verizon Wireless – by gaining access to more spectrum.
T-Mobile has long been bleeding higher-spending contract customers, although preliminary customer figures – probably released early to try and reassure MetroPCS shareholders –showed signs of improvement.
A special MetroPCS shareholder meeting to discuss the T-Mobile USA merger, originally slated for 12 April, has now been rescheduled for 24 April.