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Deutsche Telekom Sweetens MetroPCS Bid by Cutting Debt

Deutsche Telekom AG (DTE) sweetened the debt terms of an October proposal to merge its T-Mobile USA unit with MetroPCS Communications Inc. (PCS) to placate shareholders.

Under what it called a “best and final offer,” Deutsche Telekom cut the amount of debt it’s imposing on the combined company by $3.8 billion, according to a statement from the Bonn- based company yesterday. The carrier also lowered the interest rate it plans to charge on the loan by half a percentage point.

The transaction has faced opposition from investor-advisory firms and some of MetroPCS’s largest shareholders, who were concerned the new company would be loaded with too much debt, threatening to scuttle Deutsche Telekom’s second attempt to sell T-Mobile in as many years. MetroPCS agreed to delay a shareholder vote to April 24 on the new terms, which would cut the loans to $11.2 billion from $15 billion.

“This puts the new company under less pressure and gives them more strategic flexibility,” said Jonathan Chaplin, an analyst with New Street Research LLP in New York. With less of a debt burden, the new company can more easily afford to make network investments and acquire more wireless airwaves, he said.

Deutsche Telekom also extended the lockup period during which it’s barred from publicly selling shares in the combined company. The time frame will now be 18 months, up from six. That may reassure investors that the German company doesn’t plan to cut and run….”

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