T-Mobile Grabs SunCom, Contributing to Mobile M&A Activity

| September 18, 2007 | Wireless Services - U.S. | Competitive Intelligence Report

| Analyst: Bill Ho

Current Perspective: Positive
Vendor Importance: Very High
Market Impact: High

Event Summary

On September 17th T-Mobile USA signed a deal that will allow it to acquire all outstanding common-stock shares of SunCom for about $2.4 billion. The $2.4 billion equates to $1.6 billion cash and the assumption of $800 million in debt. Subject to the government and regulatory approvals, the deal is set to close in H1 2008.

Analytical Summary

• Current Perspective: Positive on T-Mobile’s proposed acquisition of Suncom, because the nation’s number four carrier is acquiring one of the few decent sized regional carriers left and getting into the consolidation and M&A game before other national rivals swoop in. Aside from the obvious benefit of acquiring a similar network infrastructure, subscribers, spectrum and revenue, T-Mobile enters a market that it previously had no presence. Moreover, the roaming savings and other $1 billion in projected synergies will help T-Mobile swallow the $2.4 billion price tag of which $1.6 billion is in cash, and the assumption of $800 million in debt.

• Vendor Importance: Very high to T-Mobile, because the acquisition of the SunCom markets provides an avenue for additional growth. This is particularly true in the large city markets in North Carolina, South Carolina and Georgia that SunCom offers, without trying to mine smaller and rural markets from the likes of Dobson and Rural Cellular that AT&T and Verizon Wireless have moved to acquire.

• Market Impact: High on the wireless services segment, because the SunCom markets were devoid of T-Mobile competition. SunCom was losing money and experiencing declining growth as the regional carrier fought off national competitors, regional carriers and the likes of unlimited regional carrier Leap Wireless. With T-Mobile added to the mix once the deal is complete, the competition can no longer use any regional service limitation arguments to win customers.

Recommended Competitor Actions

• National and regional carriers will have to change to a national playbook against T-Mobile in mid 2008 when the deal is expected to close. In the meantime, as with any merger, competitors should be playing up the uncertainty of a merger in terms of new and unwanted plan introduction and the loss of a locally focused regional carrier.

• Leap Wireless should be injecting doubt into potential customers considering SunCom unlimited plans by pointing out that T-Mobile’s national plans have none. Therefore, they should move over to Cricket as unlimited communications is part of the brand’s value proposition. Additionally, they should highlight that low-priced unlimited broadband access is coming, as it has already been launched in three Leap markets.

• Alltel should continue to work MyCircle in as the plan that T-Mobile and other carriers copied. The carrier should continue to emphasize that MyCircle provides customers with ten unlimited calling numbers instead of T-Mobile’s five in myFaves.

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