Competition will force MetroPCS to make a move

Things looked bright for MetroPCS six months ago. They had added 684,000 subscribers on the strength of new markets in New York City and Boston. They then added a number of features, like their landline simulator and family plans. It seemed like they were ready to compete with the big boys, a sentiment strengthened by their LTE aspirations. Things aren’t looking as good now, though, as the company might not be able to survive without some big moves.

The problem for MetroPCS is that many other carriers, particularly prepaid, have mimicked their flat-rate, unlimited plans. Most notable is Boost Mobile, which outperformed MetroPCS with its own $50 unlimited plan. Metro since added features to its less expensive plans, but even then, Metro charges tax while Boost does not. The MetroPCS $40 plan comes to about the same as Boost’s plan. Even more competition has emerged lately, as T-Mobile has upgraded its FlexPay plans.

The solutions are obvious: acquire or sell. MetroPCS could revisit a merger with Leap Wireless, though there are no indications that either company considers that a viable option. They could otherwise sell to a larger competitor. The linked Bloomberg article mentions America Movil, owners of Tracfone, but immediately notes the downside. Companies that own networks require large investments to maintain them, and that is even more of a factor now because of the transition to 4G networks.

According to Matthew Niehaus of Battery Ventures, Metro could be forced to make a move within a year. Considering that time frame and the general environment, I’d say that if a move happens, it will involve Leap. It makes far more sense than any other option we’ve seen to date.

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3 Responses

1. GV Says
   

   This deal should have happenned more than one year ago. Very good job describing current situation.

   
   Posted on October 27th, 2009 at 8:11 am
2. peter kent Says
   

   Yes! Merge already! Leap and Metro need to have a wedding, shotgun or not.
   Though I am hoping they take more after the Leap side of the family then Metro.

   
   Posted on October 28th, 2009 at 2:07 pm
3. Dirk Says
   

   American Movil is a far more powerful company than MetroPCS and is taking over the prepaid market especially since they launched their new brand Straight Talk with unlimited everything for $45/month on Verizon’s network Nationwide. I can’t see why AM would want to but Metro when they are doing so well on their own.

   
   Posted on October 29th, 2009 at 12:22 pm

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