As Opponents Score Wins, Analyst Says T-Mobile/MetroPCS Deal Won’t Complete Under Current Conditions


Opposition to T-Mobile’s proposed merger with MetroPCS gained traction last week as two separate shareholder advisory firms came out against the deal. Now, P. Schoenfeld Asset Management, one of the loudest opponents of the deal is using the swing momentum by scheduling a webcast for April 4th to explain its position.

Two of the most highly respected corporate governance advisory firms have now come out against the merger,” P. Schoenfeld Asset Management said in a statement. “It is time for PCS management to re-examine the terms of the proposed transaction and other alternatives available to the company, such as remaining as a stand-alone business.”

The decisions of Institutional Shareholder Services and Glass Lewis & Co advised that Metro shareholders were not getting the best possible deal. The last of the big 3 firms, Egan-Jones Proxy services came out in favor of the deal the same day as the ISS report. While advisory firms have had waning influence in recent years, it would be foolish to overlook the impact their decisions may have on undecided voters. Jonathan Chaplin, an analyst at New Street Research says Deutsche Telekom must now sweeten the deal or risk losing the vote.

“DT has to sweeten…[they] would be crazy to let it go to a vote. There’s no way they will win. They don’t have enough votes to get a deal done.”

For its part, Metro’s board continues to emphasize the benefits the merger has for its investors base as the merger offers:

“…Both immediate and long-term compelling economic value” to its investors. “The combined company will be the leading value carrier in the U.S. wireless marketplace and will be able to compete more effectively against the other national wireless competitors,” it said in a letter to stockholders. It will also be in “a better position to participate in future industry growth and consolidation.”

Chaplin suggested that after some recent meetings with Metro shareholders that it would be difficult to seal the deal as it’s now structured. “And then the ISS report pretty much clinched it.” said Chaplin

Even as two advisory firms suggest against the deal, Metro may have few options if the T-Mobile deal falls apart. No other competing bids have surfaced  and going at it alone is a possibility for Metro, but not one the company’s board believes is the best route. The combined carrier with 42.3 million customers would present a stronger challenge to AT&T and Verizon than both companies do independently.

Will all of that weigh on the minds of Deutsche Telekom as they look at the decisions of the two advisory firms in the days leading up to the April 12th vote? We’ll find out soon enough.


Tags: , , ,