T-Mobile, MetroPCS deal is one step closer
The Department of Justice indicated it won't block the T-Mobile, MetroPCS merger
The T-Mobile, MetroPCS deal looks like it's on track to be completed, as the Department of Justice won't move to block the merger.
The parent company of T-Mobile, Deutsche Telekom, said that the DOJ won't be intervening, according to a report from GigaOm. While this doesn't give it the final go-ahead, it is an important step in the deal. Remember, the DOJ stepping in was a key reason why the AT&T/T-Mobile deal fell through.
The T-Mobile, MetroPCS deal still has to go through a few more regulatory hurdles but it looks like it's on track to close later in a few months. Once it closes, it's going to take a few months for the combined entity, which will be called T-Mobile, to really start kicking into gear.
What can we expect from the T-Mobile, MetroPCS deal? Well, T-Mobile is banking on becoming the "uncarrier." It wants to make some dramatic changes in how people interact with their carrier and what they pay. This is going to ruffle some feathers and it's unclear how successful it will be.
The new T-Mobile will be making a big push for the prepaid market. It has rolled out a $70 prepaid plan that offers unlimited talk, text and 4G data without a long-term contract. It will soon be offering the iPhone and iPad and the carrier will be cutting handset subsidies and replacing those with the ability for customers to pay off hardware on a monthly basis with no or little interest. You can also expect it to start rolling out its 4G LTE network this year and the spectrum it gains from MetroPCS will be vital to that.
The new T-Mobile is aiming to be a transparent company that lets users know exactly what they're paying for. It has been feisty in its new advertisements and seems to be going after AT&T in a big way.
It's an interesting and bold strategy but it's unclear if it will work. The broad strokes of the "uncarrier" plan sound great in a vacuum but it may not resonate in this market. For example, it's not as simple to switch your phone to whatever provider you want thanks to the divide between the GSM carriers and the CDMA ones. Hence, you're seeing T-Mobile go after AT&T customers but they're not as active in courting Verizon and Sprint ones.
Additionally, subscribers with a long-term contract are more lucrative for a carrier's bottom line than prepaid users because the churn rate is lower. It also appears like customers like getting free or discounted phones and don't mind signing a two-year contract for that. When you also factor in the monthly hardware payments, the T-Mobile prepaid plans may not have a major price advantage over AT&T and Verizon.
Still, the new T-Mobile can't outgun AT&T and Verizon, so it's important that they take a bold, new approach. We'll be watching it closely.