The wireless carrier market has been relatively quiet ever since AT&T and T-Mobile USA called off their proposed merger last year in the face of regulatory scrutiny. This could change with the news that T-Mobile USA has a found a new partner in MetroPCS.

Deutsche Telekom and MetroPCS Communications said yesterday that they have signed a definitive agreement to merge T-Mobile USA and MetroPCS. The companies hope to create the leading value wireless carrier in the United States, a move that may have other carriers looking to boost their role as well.

?The deal could spark a final wave of consolidation in the US mobile market, which has been in limbo on the M&A front since regulators blocked AT&T?s bid for T-Mobile USA last year,? said Mike Roberts, principal analyst at Informa Telecoms & Media, Westborough, MA.

?Sprint also reportedly moved to acquire MetroPCS earlier this year but was blocked by its board, and it now appears too late for Sprint to make a counter-offer for MetroPCS,? he said. ?So it may turn its attention to Leap Wireless and/or US Cellular ? the next-largest operators in the U.S. after MetroPCS ? both have near six million subscribers compared to MetroPCS with nine million, and like MetroPCS they use the same CDMA technology as Sprint.?

The value market
The deal with MetroPCS will strengthen T-Mobile?s position in the United States, helping it to increase its total subscriber base by 28 percent for a total of 43 million and increase its market share from 10 percent to 13 percent, per Mr. Roberts.

The deal will also strengthen T-Mobile USA?s position in the value segment, with the new company having 23 percent of the U.S. prepaid market.

T-Mobile USA said the deal will help it offer a wider selection of attractive, competitively-priced plans, including contract, no-contract monthly, SIM-only, pay-as-you-go and mobile broadband services.

?This is a major boost for T-Mobile,? Rich Karpinski, senior analyst for mobility at Yankee Group, Boston . ?Along with several other recent moves ? including its $2.4 billion tower sale, which raised cash, and spectrum acquisitions from AT&T and Verizon ? it finally gives T-Mobile a story that describes how and why it will remain relevant in the future.

?After its acquisition by AT&T fell through, its future was anything but clear,? he said. ?Now, it has the financial structure and spectrum position to support what is a fairly unique market position ? to be the player in prepaid/value plan part of the market.

LTE play
A key reason for the deal is so that T-Mobile USA can continue to build its LTE network. However, it will have to transition the combined spectrum holdings to LTE, which will take significant time and investment and could undermine the benefits of the deal.

Even with the deal, T-Mobile will still be at a competitive disadvantage to the larger AT&T and Verizon Wireless.

?For Deutsche Telekom its T-Mobile USA acquisition of MetroPCS shows it is committed to investing to improve its scale and strength in the U.S. market, after its attempt to exit the U.S. last year by selling T-Mobile USA to AT&T was blocked by regulators,? Informa?s Mr. Roberts said.

?However Deutsche Telekom will need to do more in future given that even after the acquisition of MetroPCS it will still have less than half the market share of the two dominant players,? he said.

Sprint feels the squeeze
According to the terms of the deal, Deutsche Telekom will hold 74 percent of the new business, which will retain the T-Mobile name. MetroPCS's shareholders, who will hold the remaining stake, will receive a payment of approximately $1.5 billion.

The combined companies will look to offer a wider selection of affordable mobile products and services, deeper network coverage and to combine their efforts to form a common LTE network.

The MetroPCS merger, which is not expected to face the same regulatory scrutiny that ultimately undid the AT&T deal, is expected to close during the first half of 2013.

The deal, while not an immediate threat to the two largest carriers, is likely to have other smaller carriers worried.

?Sprint immediately feels a squeeze, sitting between AT&T and Verizon ? who clearly lead the U.S. market ? and T-Mobile which now will place it under extreme price pressure ? including mimicking Sprint's unlimited data plans,? Yankee Group?s Mr. Karpinski said.

?Cricket/Leap will feel pressure for not having done a deal first; if it doesn't sell off soon look for it to double down on selling smartphones and related services to the underserved,? he said.

?Other regional operators, like C-Spire and US Cellular, must continue to carve out niches while working to not get left behind on the spectrum front.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York