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MetroPCS Closer to Deutsche Telekom

NEW YORK ( The Deal) - Deutsche Telekom AG's T-Mobile USA Inc. and MetroPCS Communications Inc. said they are set to close the merger of their cell operations pending shareholder approval, setting the stage for the final showdown between MetroPCS (PCS) and P. Schoenfeld Asset Management LP over the merits of the deal.

Shares of MetroPCS gained 0.3% to $10.51 in morning trading to extend its 2013 advance to 5.7%. Deutsche Telekom traded in Germany rose 0.2% to 8.52 euros.

MetroPCS said the last regulatory hurdle, approval from the Committee on Foreign Investment in the United States, was in hand Wednesday, March 20. The Federal Communications Commission cleared the deal earlier this month.

PSAM, which holds about 2.5% of MetroPCS, has been conducting a solicitation against the combination of T-Mobile into MetroPCS on the belief that the deal unfairly values MetroPCS and the company would be better off following a standalone path.

The MetroPCS shareholder vote on the transaction is April 12. The deal offers MetroPCS shareholders $4.08 in cash and half of a share of the combined company. In proxy materials, MetroPCS has said the value per share should equate to between about $16.50 and $18.80 per share. MetroPCS shares currently trade for $10.57 at a discount of about 55% to that value projection.

Both parties have actively courted shareholders this week; PSAM filed its white paper explaining its position against the deal and MetroPCS has filed its shareholder presentation.

On Thursday, PSAM followed up with a litany of questions that it believes MetroPCS should further address before shareholders are asked to weigh in on the reorganization. PSAM asks MetroPCS to explain why its share price has declined 23% since the deal announcement in October when the market has been up and why insiders have been sellers of MetroPCS shares. The hedge fund said that while the deal value was ramped down for MetroPCS shareholders during negotiations because MetroPCS's performance was weak, it has not been adjusted upward when MetroPCS performed better.

PSAM also raises questions about why a $1.5 billion of future spectrum purchases is deducted from its relative value in the combination. And the fund questions the cost of a $15 billion intra-company loan to Deutsche Telekom, which will hold 74% of the combined U.S. cellphone operations. PSAM's complaints about the deal or the disclosure explaining its rationale include numerous other questions.
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