T-Mobile-Metro PCS merger is more good news than bad for consumers

T-Mobile-Metro PCS merger is more good news than bad for consumers

Consumer Reports News: October 03, 2012 02:08 PM

T-Mobile and MetroPCS today announced an agreement to merge. This marriage, which would combine a major cell-phone carrier and a scrappy no-contract one, poses both promises and threats for consumers.

The good news about the merger:

It promises to bolster competition among major carriers. T-Mobile's proposed merger with AT&T, dropped in 2011 after opposition by federal regulators, would have reduced the number of big national wireless providers to three, Verizon, Sprint, and an even-bigger AT&T. The merger with MetroPCS should give an expanded T-Mobile a better shot at remaining competitive with other telecom titans in coverage and more.

In particular, there's promise for preserving a strong prepaid option in a combined T-Mobile-MetroPCS. Contract-free cell-phone service hasn't gained a lot of traction with consumers (including our readers), for a host of reasons. MetroPCS is a specialized prepaid carrier, and T-Mobile has been among the leading major carriers for prepaid--it was early to offer most or all of its phones on a prepaid basis, and its prepaid service has been among the more satisfying in our cell-phone carrier Ratings.

T-Mobile inherits a promising data network. MetroPCS has distinguished itself, when no other no-contract carrier has done so, by building out its own 4G network in the dozen or so metropolitan areas in which it sells service.

While we have lacked sufficient data to rate Metro PCS for satisfaction with data service in our Ratings of it and other carriers, that network infrastructure can only help T-Mobile improve its network coverage in those cities.

And the potential bad news:

Neither carrier is particularly satisfying to most readers. In our Ratings of cell-phone carriers, despite its decent prepaid score, T-Mobile rated lower than most others for reader satisfaction in its key segment, namely contract service. And Metro PCS was among the lower-scoring prepaid carriers.

The upshot: There's little reason to think the combined T-Mobile-MetroPCS will offer satisfaction to rival the best carriers in our Ratings.

MetroPCS's low pricing will be lost, or at least endangered. MetroPCS service may not have been particularly distinguished among our readers. But it sure is cheap. For as little as $40 a month, the carrier offers a plan with unlimited talk and text, plus a very basic 250MB of data. T-Mobile plans can be fairly low-priced compared to the other majors, but the closest monthly plan to the one above (with even less data--200MB, rather than 250MB) costs $70, $30 more than the MetroPCS plan.

Based on past mergers between carriers, the lesser partner's pricing is typically subsumed by the major that bought it—which strongly suggests that a combined T-Mobile-Metro PCS will adopt T-Mobile's pricing.

This proposed merger still requires approval from MetroPCS shareholders, the Washington Post reports, and from federal regulators. But the Post report cites analysts as saying they expect little opposition from either group to the deal.

Sources:
T-Mobile USA and MetroPCS to combine, creating value leader in U.S. Wireless marketplace [T-Mobile press release]
T-Mobile, Metro PCS talk merger, leave questions for Sprint

Related:
AT&T pulls plug on plan to buy T-Mobile

Paul Reynolds


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