MetroPCS execs bemoan valuation ahead of T-Mobile deal

NEW YORK Wed Dec 5, 2012 5:34pm GMT

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NEW YORK (Reuters) - MetroPCS Communications Inc PCS.N executives complained on Wednesday that the market is undervaluing its shares ahead of the merger with planned T-Mobile USA and too focused on whether or not Sprint Nextel Corp (S.N) would make a counterbid.

MetroPCS shares closed down 7 percent on Tuesday after Reuters reported Sprint was unlikely to bid for MetroPCS, which has already agreed to merge with T-Mobile USA, a unit of Deutsche Telekom (DTEGn.DE). The Reuters report late Monday cited unnamed sources.

The week before, its shares spiked after analysts speculated that Sprint would make a counteroffer.

"Everybody's focused on the interloper," MetroPCS Chief Executive Roger Linquist told investors on the sidelines of a UBS media and communications conference.

"It's a huge distraction," said Linquist, adding that investors should instead focus on MetroPCS' fundamentals and the value of the T-Mobile USA deal, which will bring "significant opportunity for cash flow improvement."

Linquist declined to comment on whether or not MetroPCS has been approached by Sprint, but noted the company would need to examine any such offer.

The company's executives were peppered with questions at the conference about whether they could provide more clarity on the valuation of the T-Mobile USA deal. The tie-up is hard to calculate because T-Mobile USA is not a publicly traded company.

"We think we're trading at the very low end of the range," MetroPCS Chief Financial Officer Braxton Carter told the conference, without providing a valuation range for the deal.

MetroPCS shares traded up 0.6 percent at $10.01 on New York Stock on Wednesday. The stock, which closed at $10.77 on Monday before the report about Sprint, has been volatile since the T-Mobile USA deal was announced on October 3.

Several hedge fund investors told Reuters the lower share price suggested the market now sees only a 10 percent to 15 percent probability of a rival bid. Last week that probability was at 50 percent to 60 percent, said the investors, who asked not to be named.

Asked about the likelihood of an eventual combination of Sprint, MetroPCS and T-Mobile USA, Linquist said he expects more consolidation in the U.S. wireless market.

"It has to happen at some point, in my view," Linquist said, noting it was necessarily for the health of the industry, "Consolidation of the industry needs to occur."

But he said that could take five to ten years.

(Reporting by Sinead Carew and Nadia Damouni; Editing by Jeffrey Benkoe)

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