While the news of T-Mobile purchasing MetroPCS has come as a bit of a shock to some people, it really shouldn't. At first it does seem surprising that a GSM carrier would be interested in a CDMA network, especially considering the absolute disaster that was the Sprint/Nextel merger. This is where the sense starts to be made. T-Mobile said they would use AT&T's money to establish an LTE network, and it looks like they have. This purchase has less to do with customers, though it will combine the 4th and 5th largest carriers in the country into a new but still 4th largest network (42.5 million), and more to do with picking up MetroPCS's existing LTE network.
While MetroPCS's LTE coverage isn't massive, it is infinitely larger than that of T-Mobile. Metro currently offers LTE coverage in 14 major markets, though they consider their markets differently than everyone else, such as North Florida, Central Florida and South Florida as opposed to Tampa, St. Petersburg/Clearwater and Orlando all being considered separate for everyone else. With 0 markets for T-Mobile, adding the LTE network of Metro into the fold will give them a leap on their commitment to provide LTE service in 2013, all without having to add to their existing 35,000 towers.
Now, that isn't the only reason to add Metro to the T-Mobile family. Currently, Sprint absolutely owns the prepaid market. Virgin Mobile and Boost Mobile are both Sprint-powered prepaid brands and together have more customers than MetroPCS has currently. Combining the T-Mobile brand with the MetroPCS pricing structure could give T-Mobile's prepaid offering the push to knock Virgin and Boost off of their high horses quickly. While prepaid is not as profitable as the contract phones are, it is a quickly growing market that even Apple has recognized it as a market to be in and offers the iPhone through Virgin Mobile. It is important to note that T-Mobile and MetroPCS both do not offer the iPhone.
So, while the varied technologies might seem like a bad idea to base a merger on, there are some very good reasons for T-Mobile to make this move now. The wireless industry is not one that does well with minor players, and both of these carriers have been considered minor players for a very long time. This move will get them closer in subscriber count (T-Mobile: 41.5 million combined, Sprint: 56 million, AT&T: 95.5 million, Verizon: 107.7 million) to the big players without the massive cost of trying to get involved with, say, Sprint. With the higher subscriber count it will be easier to negotiate handset deals and could even possibly add the iPhone to its lineup for the first time.
Of all of the carriers, Sprint should be the most worried, obviously. There is only a 15 million subscriber difference between the carriers, so long as you remove the prepaid numbers from the count. The networks will be closest in LTE coverage, Sprint currently offers 25 markets, but is adding another 100 in short order, and both companies will have a strong prepaid focus, with Sprint having over 10 million prepaid subscribers and MetroPCS having just under 10 million subscribers to its almost entirely prepaid network. With the 3rd and 4th largest carriers being so close in size, philosophy and market focus, it will be interesting to see how each carrier differentiates itself from the other in the coming two years.
So, the real question here is, does this announcement make you more or less interested in joining the T-Mobile/MetroPCS brand? Let me know in the comments.