The investor advisory firm Institutional Shareholder Services Inc or ISS has recommended to shareholders the rejection of the merger between T-Mobile USA and MetroPCS Communications Inc. Lacking the support of its largest shareholder, the planned merger is doomed to fail.
ISS opposed the deal because of the unfavorable terms as well as the potential that MetroPCS to continue as an independent company despite the merger. MetroPCS would bolster its network with the acquisition of more wireless airwaves, resulting in additional mergers down the line.
ISS representatives have asked, "The question remains, 'Why now?'. Absent merging with T-Mobile, PCS will still have US$1.5 billion of cash to dedicate to new spectrum in some way and could continue operating as a stand alone company."
Criticisms include the merger loading up the new company with too much debt in order for MetroPCS to compete in the market. With the complexity of the transaction above the heads of many investors, as it is a reverse merger creating a publicly traded business where 74% is owned by T-Mobile parent Deutsche Telekom AG, advisory firms are thus sought upon to give light to the deal's specifics for simple shareholders.
Other shareholders have also voiced their opposition to the deal. MetroPCS's biggest shareholder, Paulson & Co has also joined ISS. Paulson owns 10% outstanding shares of MetroPCS.
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