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MetroPCS Surges on T-Mobile Merger Speculation

Stocks in this article: PCS T VZ S

NEW YORK ( TheStreet) - MetroPCS (PCS) shares were climbing Tuesday following a Bloomberg report that the carrier may merge with T-Mobile USA.

Deutsche Telekom, the parent company of T-Mobile USA, is nearing a deal with MetroPCS to create a U.S. operator that would be publicly listed, according to Bloomberg. Citing people with knowledge of the matter, the article said Deutsche Telekom's supervisory board is scheduled to meet in Bonn on Wednesday to approve the deal. Part of the transaction will reportedly involve a stock swap giving the German telecom giant majority ownership of the combined company.

An announcement about the deal could come on Wednesday, Bloomberg said. MetroPCS shares were up 19% at $13.71 on volume of more than 26 million, far eclipsing the issue's trailing three-month daily average churn of 7.1 million.

Bernstein Research analyst Robin Bienenstock described the potential deal as a "shotgun wedding" that would leave rival Sprint (S) at the altar. The analyst nonetheless acknowledged the benefits for MetroPCS and Deutsche Telekom.

"For MetroPCS, depending on price, this appears to represent an elegant exit," he wrote, in a note. "For Deutsche Telekom this is also a positive, while the news is decidedly mixed for Sprint (S). We assume that any deal would leave a listed vehicle in the U.S. where multiples are historically 25% higher than European multiples so leaving some room for error for Deutsche Telekom."

Rumors of a possible MetroPCS/T-Mobile merger have swirled before. Earlier this year, for example, there was chatter about a deal, just months after the Department of Justice blocked T-Mobile's attempted merger with AT&T (T).

MetroPCS and Deutsche Telekom have not yet responded to TheStreet's request for comment on this story.

Sprint shares fell 4.46% to $4.95. AT&T was up 0.19% to $37.82, while Verizon (VZ) slipped 0.11% to $45.76.

-- Written by James Rogers in New York.

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