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Speaking to investors offstage at the UBS Media and Communications conference in New York this week, according to news reports, MetroPCS (NASDAQ: TMUS ) CEO Roger Linquist made it quite clear what he thought of a possible Sprint Nextel (NYSE: S ) counteroffer to T-Mobile's proposed deal to acquire his company.
"It's a huge distraction," he said, calling Sprint an "interloper."
Speculation about a Sprint bid for MetroPCS had been building ever since T-Mobile announced its intention to buy MetroPCS. It had reached its highest point when Sprint and SoftBank postponed filing their merger proxy statement/prospectus with the SEC. To some investors, that was a sign that Sprint was ready to make a move on MetroPCS.
But, after Reuters reported several knowledgeable sources saying that such a bid from Sprint would not be forthcoming, the price for MetroPCS shares dropped 7% on Tuesday.
"Everybody's focused on the interloper," said Linquist. Investors should be looking instead at the "significant opportunity for cash flow improvement," of the combined T-Mobile and MetroPCS.
When onstage for his formal presentation at the conference, Linquist was quick to point out one of the advantages of the new publicly-traded company that MetroPCS and T-Mobile will form.
I must tell you, I think the nature of this scale that this brings can help us with one of the big [problems] limiting [us] today, which is handset pricing. Subsidies that we all face ... are a major factor in our operating margins ... [This deal] will give us an opportunity to get the handset costs, we believe, at a lower level than we've been able to achieve in the past.
However, the more recent announcement from Rene Obermann, the CEO of T-Mobile's parent company Deutsche Telekom, that T-Mobile will be selling "Apple products," may dilute that expected subsidy advantage. Apple (NASDAQ: AAPL ) has been able to command the highest prices for its iPhones and iPads, and much of that cost is eaten by the carriers in order to sell subscribers on long-term contracts.
When asked about avoiding massive customer disruptions during the merger process, Linquist was able to get one more dig in on Sprint. "This is not a Sprint Nextel," he said, referring to the problems Sprint encountered trying to make Sprint's and Nextel's two very different networks work smoothly.
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