T-Mobile announced today that it will pay cash and assume the debt of SunCom Wireless, a company that T-Mobile is using as a roaming partner. The merger will cost T-Mobile $2.4 billion in cash and assumed debt. Under the agreement, sanctioned by both boards, SunCom shareholders will receive $27 per share. This purchase price represents 22.7% over the closing price of SunCom common stock on the New York Stock Exchange on Friday, September 14. Large shareholders like Highland Capital Management and Pardus Capital Management, who together own over 50% of SunCom’s issued common stock, have committed to vote in favor of the buyout.
SunCom has market share in North Carolina, South Carolina, Tennessee, Georgia, Puerto Rico and the U.S. Virgin Islands. SunCom operates a GSM/GPRS/EDGE network and has provided roaming service to T-Mobile in these markets since 2004. T-Mobile expects this acquisition to expand its U.S. nationwide coverage (excluding roaming) from 244 million potential customers to 259 million. T-Mobile also expects to realize synergies with a net present value of approximately $1 billion through reduced roaming and operating expenses. T-Mobile also hopes for growth in the newly acquired market areas.
Robert Dotson, president and chief executive officer of T-Mobile USA, said, “The strategic fit of the SunCom operations will make this a near-perfect acquisition. It will round out our domestic footprint, allowing us to serve 98 of the top 100 markets, and will significantly benefit our financial position by reducing roaming expense. Furthermore, it will add a talented group of employees that will enable us to serve more than one million new SunCom customers with industry-leading national products and services available under the T-Mobile brand.”
As mobile phone service starts to reach the saturation point in developed markets, it is only natural that companies will continue to merge as the competition for market share becomes more difficult. Cost cutting moves, like T-Mobile’s buying of a roaming partner, will make bottom lines blacker and services sleeker for customers. The downsides to such movers are a loss of jobs and the potential for less competition as fewer mobile phone providers control the airways and infrastructure that keeps us connected on-the-go.