MetroPCS Communications, Inc. (NYSE: PCS; "MetroPCS" or the "Company") today mailed a letter to stockholders in connection with its proposed combination with T-Mobile USA, Inc. ("T-Mobile") recommending that stockholders vote 'FOR' the proposed combination. The letter highlights the significant benefits to MetroPCS' stockholders of the value maximizing proposed combination and corrects inaccurate and misleading statements that have been made regarding the proposed combination. The full text of the letter follows:
March 12, 2013
Dear Fellow Stockholder:
On April 12, 2013, MetroPCS Communications, Inc. ("MetroPCS") will hold a Special Meeting of Stockholders to vote on the proposed combination of MetroPCS with T-Mobile USA, Inc. ("T-Mobile"), which will create the value leader in the U.S. wireless marketplace. MetroPCS stockholders of record as of the close of business on March 11, 2013 are entitled to vote at the Special Meeting.
The MetroPCS board has always been committed to considering strategic options and pursuing those that drive stockholder value. After a multi-year, thorough review of MetroPCS' options, with the assistance of independent financial and legal advisors, the MetroPCS board has unanimously concluded that the proposed combination with T-Mobile is the best strategic alternative for our stockholders. The immediate cash payment you will receive and the significant ownership interest you will hold in the combined company represent a substantial premium to MetroPCS' stand-alone value, and your meaningful ownership in the combined company will allow you to participate in the potential synergies and value created by this combination.
PROPOSED T-MOBILE / METROPCS COMBINATION IS THE
BEST ALTERNATIVE FOR METROPCS' STOCKHOLDERS
After conducting a thorough, multi-year process, MetroPCS' board of directors and special committee, with the assistance of their independent financial and legal advisors, concluded that the proposed combination with T-Mobile was the best strategic alternative for the Company and its stockholders:
Compelling economic terms for MetroPCS' stockholders;
Addresses MetroPCS' critical spectrum needs and competitive disadvantages;
Permits MetroPCS brand expansion into unserved and underserved major metro areas; and
Improves the customer value proposition through a stronger, deeper data network and a broader, better device line-up.
If the proposed combination is not approved, MetroPCS' stockholders will not enjoy its compelling benefits, which could lead to a loss of value for MetroPCS' stockholders.
PROPOSED T-MOBILE / METROPCS COMBINATION IS
MORE ATTRACTIVE THAN METROPCS ON A STAND-ALONE BASIS
The proposed combination will provide MetroPCS' stockholders with a $1.5 billion aggregate cash payment, or approximately $4.06 per share (prior to the reverse stock split that will occur in connection with the closing of the proposed combination), as well as an approximate 26% ownership stake in the combined company that allows MetroPCS stockholders to participate in the expected significant equity upside of the combined company. The proposed combination maximizes stockholder value as illustrated below:
At 5x 2013 forecasted EBITDA (illustrative):
The value for MetroPCS stockholders, including the net present value of projected cost synergies, represents an approximately 70% - 93% premium to the stand-alone MetroPCS value per share; and
The stand-alone MetroPCS value per share (after deducting $1.5 billion in cash reserved for the acquisition of spectrum) represents an approximately 19% decline vs. the current MetroPCS share price.1
Based on the five-year discounted cash flow analysis undertaken by the MetroPCS special committee's independent financial advisor, MetroPCS stockholders would receive:
Approximately 46% premium vs. a stand-alone MetroPCS value; and
Approximately 143% premium vs. the average price target, assuming the $6-7 billion of net present value2 projected cost synergies are achieved.
PROPOSED T-MOBILE / METROPCS COMBINATION
CREATES SUSTAINABLE LONG-TERM VALUE FOR STOCKHOLDERS
We expect MetroPCS stockholders to benefit meaningfully from the combined company's:
Value Leadership: The combined company will be well-positioned and have a significant presence in the industry's fast-growing prepaid (i.e., no annual contract) services space – and offer an outstanding customer experience with great customer value and choice;
Increased Size and Scale: The combined company will be well-positioned competitively with significant spectrum holdings, deep nationwide network coverage and more network capacity;
Significant Synergies: The combined company will benefit from projected cost synergies of
$6-7 billion net present value;2 and
Strong Financial Position: The combined company will have attractive growth prospects, financial flexibility and direct capital markets access to compete effectively, and a sustainable capital structure and credit profile as evidenced by S&P's BB credit rating.
METROPCS CONDUCTED AN EXTENSIVE,
MULTI-YEAR PROCESS TO MAXIMIZE VALUE, CULMINATING IN THE PROPOSED T-MOBILE / METROPCS COMBINATION
The MetroPCS board and special committee, with the assistance of independent financial and legal advisors, undertook an extensive, multi-year process to explore all strategic and financial alternatives – including remaining a standalone company. During this thorough and robust process, MetroPCS:
Engaged in discussions with all major spectrum holders and potential strategic parties regarding potential spectrum acquisition and M&A opportunities;
Participated in significant FCC auctions of spectrum with disappointing results;
Weighed the benefits and risks of the proposed combination against the benefits and risks of MetroPCS remaining a stand-alone company; and
Determined that the proposed combination with T-Mobile would deliver the highest value to MetroPCS stockholders.
THE COMBINED COMPANY WILL BE THE VALUE LEADER IN U.S. WIRELESS
The combined company will be well-capitalized and positioned to compete effectively with large national carriers as the premier challenger in the U.S. wireless marketplace. The proposed combination will:
Allow the combined company to extend the MetroPCS brand into unserved and underserved major metro areas;
Facilitate the offering of a broad product portfolio, including Apple devices;
Generate substantial additional growth in the fast-growing no contract space; and
Provide significant spectrum with a path to at least 20x20 MHz 4G LTE in approximately 90% of the top 25 U.S. metro areas by 2014+ for a fast, reliable and robust nationwide 4G LTE network.
THE COMBINED COMPANY'S STRONG FINANCIALS AND CAPITAL STRUCTURE ARE
COMPELLING FOR METROPCS STOCKHOLDERS
The combined company will have an attractive growth profile and the financial flexibility to compete effectively. In addition, the combined company's capital structure will provide MetroPCS' current stockholders with the opportunity for significant participation in the attractive equity upside potential of the combined company. Specifically, the combined company is expected to have:
Target five-year (from 2012 to 2017) compounded annual growth rates in the range of 3% to 5% for revenues, 7% to 10% for EBITDA and 15% to 20% for free cash flow;
Target EBITDA margins of 34% to 36% at the end of the five-year period (from 2012 to 2017); and
Projected cost synergies of $6-7 billion net present value,2 with an annual run-rate of
$1.2-1.5 billion after an integration period.
THE STATEMENTS REGARDING THE PROPOSED COMBINATION BY CERTAIN STOCKHOLDERS ARE INACCURATE AND MISLEADING
MetroPCS would like to correct important inaccuracies and misperceptions regarding the proposed combination:
Misperception #1: Leverage is too high.
Reality: Leverage is appropriate for the combined company and is in-line with peers and MetroPCS' historical average.
The combined company's S&P credit rating of BB is higher than peers and MetroPCS; and
The combined company will de-lever organically after 2013 through cost savings initiatives, a reduction in capital expenditures and post-integration synergies; and
Investor comfort with the combined company's capital structure and credit profile is underscored by strong support for the combined company's recent senior notes offering as well as the December 2012 consent solicitation on MetroPCS' existing senior notes.
Misperception #2: The Deutsche Telekom ("DT") debt terms are unreasonable.
Reality: The debt terms are market-based and represent a favorable deal for the combined company.
No market exists for the size of the required $21 billion debt commitment – at the time of the deal or today;
The pricing mechanism is designed to reflect market conditions;
The DT debt enables the combined company to avoid significant fees and pricing risk at close; and
With DT's financing, the combined company will have a long-lasting capital structure in place at close with no near-term maturities and significant breathing room.
Misperception #3: The combined company should issue secured debt.
Reality: Unsecured debt provides the combined company with flexibility for the future.
Secured debt would limit the combined company's ability to invest and compete; and
Unsecured debt was a key DT requirement and an important negotiation consideration.
Misperception #4: The 26% / 74% ownership split is unfair at multiple parity.
Reality: A less favorable ownership stake ranging from 17%3-24%4 would result after appropriate deduction for MetroPCS' $1.5 billion of cash reserved for spectrum acquisitions and adjustments to EBITDA, as disclosed in the MetroPCS amended definitive proxy statement.
Combination with T-Mobile results in significantly more value to MetroPCS stockholders vs. stand-alone.
Maximize the Value of Your Investment in MetroPCS – Vote "FOR" the PROPOSED Combination with T-Mobile on A GREEN Proxy Card
The MetroPCS board unanimously recommends that you vote your shares FOR all of the proposals relating to the proposed combination with T-Mobile by returning the GREEN proxy card you will receive shortly with a "FOR" vote for all proposals. The failure to vote or an abstention has the same effect as a vote against the proposed combination. Because some of the proposals required to close the proposed transaction require at least an affirmative vote of a majority of all outstanding shares, your vote is important. If stockholders do not approve the proposals related to the proposed combination, there is no assurance MetroPCS will be able to deliver the same or better stockholder value in the future.
We urge you to discard any white proxy cards you may receive, as they were sent by a dissident stockholder. If you previously submitted a white proxy card, we urge you to cast your vote as instructed on the GREEN proxy card as soon as you receive it. A vote on the GREEN proxy card will revoke any earlier dated proxy card that was submitted, including any white proxy card. If you have questions or need assistance voting your shares, please contact our proxy solicitor, MacKenzie Partners, Inc., toll-free at (800) 322-2885 or call collect at (212) 929-5500.
On behalf of your board of directors, we thank you for your continued support.
/s/ Roger D. Linquist
Roger D. LinquistChairman of the Board and Chief Executive Officer