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MetroPCS pre-merger talks could cause bidding war with other providers

When Deutsche Telekom, the parent company for MetroPCS Communications and T-Mobile, announced merger plans in early October everything seemed set in stone. The two companies would merge together, inevitably keeping the T-Mobile name, while paying out nearly $1.5 billion in cash to MetroPCS stock holders.

But even in the beginning there were other interested companies that wanted in the on the booming cell phone market. According to reports, Deutsche Telekom had several deals in the works including a three-way deal with another company, Leap Wireless International Inc., which is described as being a competitor of MetroPCS in the pay-as-you-go wireless market.

But recently, the Texas-based company released a new filing describing "a frenzy of deal discussions leading up to the merger agreement with T-Mobile." According to Deutsche Telekom, an unnamed company has recently placed a bid that would offer $13.39 a share in MetroPCS stock. This new bid may have been the reason that MetroPCS stock rose this week to approximately $11 a share.

Though the merger has not been completely finalized at this time, Deutsche Telekom has pointed out that if MetroPCS does decide to back out of the arrangement with T-Mobile, they would have to pay about $150 million. In this event, Deutsche Telekom is prepared for a counterbid from other companies, including one from the United States' third-largest wireless carrier, Sprint.

Source: Bloomberg Businessweek, "MetroPCS Climbs After Company Reports on Pre-Merger Talks," Scott Moritz and Serena Saitto, Nov. 19, 2012