Deutsche Telekom submits final offer for MetroPCS

German operator group Deutsche Telekom has submitted what it says is a final offer for US operator MetroPCS. The firm hopes to persuade a number of MetroPCS’s shareholders that voiced objections to the terms of the initial bid.

The two operators announced plans to merge in October last year with Deutsche Telekom, through its subsidiary T-Mobile USA, owning 74 per cent and MetroPCS left with the remaining 26 per cent. MetroPCS’s board of directors had accepted the initial bid, which would see its shareholders receiving $1.5bn in cash for the stake.

However, some shareholders opposed the merger, including hedge fund Paulson & Co, which owns 9.9 per cent of MetroPCS. The opposition stemmed from the terms of the initial bid, which stated that T-Mobile USA would form part of the combined company with shareholder loans totalling $15bn.

“While we believe in the strategic merits of the proposed combination, Paulson believes the pro forma company has too much debt at too high an interest rate to be competitive in the well capitalised US wireless industry,” the hedge fund wrote in a letter to the MetroPCS board.

As a result, the US operator postponed its shareholder meeting to approve or reject the offer to later this month, prompting Deutsche Telekom to improve its offer. In its revised offer Deutsche Telekom has reduced the shareholder loans by $3.8b to $11.2bn. The German firm said that this move significantly increases the equity value of the combined company.

“Deutsche Telekom will also reduce the interest rate on the $11.2bn of shareholder loans by 50 basis points,” the operator group said in a statement. “This lower rate reflects the new capital structure of the combined company, the improved capital markets environment in recent months, and the interest rate level of MetroPCS newly issued $3.5bn of bonds priced in March.”

The merger was approved by the US Federal Communications Commission (FCC) last month, and MetroPCS has rescheduled its shareholder meeting to April 24.