BERLIN (AP) - The parent company of T-Mobile says it is merging its cell phone business with MetroPCS.
Deutsche Telekom says its board of directors and the supervisory board have approved the merger Wednesday. It says the board of MetroPCS has also accepted the deal.
It says Deutsche Telekom will hold 74 percent of the new business. MetroPCS's shareholders will have the remaining stake and receive a payment of about $1.5 billion.
The companies confirmed they were in talks Tuesday. Analysts said the deal could shore up two struggling players in the U.S. wireless industry.
The combination with Dallas-based MetroPCS, which has 9.3 million subscribers, still leaves T-Mobile USA - the country's fourth-largest cellphone company with 33.2 million subscribers - trailing the market's No. 3, Sprint Nextel Corp.
T-Mobile USA is the country's fourth-largest cellphone company, with 33.2 million subscribers. Adding the 9.3 million subscribers of Dallas-based MetroPCS, the industry's No. 5, would still leave T-Mobile trailing No. 3 Sprint Nextel.
However, the deal would give T-Mobile access to more space on the airwaves, a critical factor as cellphone carriers try to expand their capacity for wireless broadband. Last year, AT&T struck a deal to buy T-Mobile USA for $39 billion for much the same reason. That deal was shot down by regulators, who believed competition would suffer if the second-largest cellphone company were to gobble up the fourth-largest.
Regulatory concerns would be much milder over a T-Mobile-MetroPCS combination. Both companies are relatively small, and Bellevue, Washington-based T-Mobile USA has been losing subscribers for the last two years.
A linkup would be complicated by the fact that MetroPCS and T-Mobile USA use different network technologies. That means MetroPCS phones would not work on T-Mobile USA's network, and vice versa. However, both companies are deploying the same "fourth-generation" or "4G" technology, so they're on a path to harmonizing their networks.
Analyst Kevin Smithen at Macquarie Securities said the combination of the two networks would be "very complicated," and would still leave T-Mobile as a relatively small player struggling against industry leaders Verizon Wireless and AT&T Inc.
"A combination of two subscale struggling competitors will not result in a credible long-term competitor," he said.
(Copyright 2012, The Associated Press. All Rights Reserved.)