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FCC near a decision on the merger of T-Mobile and MetroPCS

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March 13, 2013

A few reports that surfaced earlier yesterday claiming that the FCC was nearing a favorable decision on the merger of T-Mobile USA and MetroPCS proved accurate after all.

Late Tuesday, the FCC issued a declaratory ruling actually approving the merger. In a statement, FCC Chairman Julius Genachowski said the deal will hopefully strengthen competition in the U.S. wireless communications segment.

"Today’s action will benefit millions of American consumers and help the U.S. maintain its global leadership in mobile it has regained in recent years," Genachowski said.

Concurrent with the commission's decision, MetroPCS sent a letter to shareholders that urged them to vote in favor of the merger. MetroPCS will hold a stockholder's meeting on April 12, 2013, to vote on the merger.

But investors didn't immediately express their enthusiasm for the merger. Shares of the company were down just under 2 percent to $10.31 following the commission's announcement.

Regulatory approval of the merger removes a big hurdle for T-Mobile to move forward with its "uncarrier" strategy and its subsequent rollout of LTE.

T-Mobile's parent company, Deutsche Telekom, announced the merger back in October of 2012. Deutsche Telekom has agreed to pay $1.5 billion for a 74 percent share of the company, while MetroPCS shareholders will hold onto the remaining portion.

In response to opposition from the Communication Workers of America (CWA), which argued that the merger would mean a loss of jobs in the United States, the FCC said the record suggests otherwise, noting that the merger will enable "increased employment and bolster the long-term viability of the combined wireless provider."

The FCC said the applicants have consistently maintained that they have no plans to move call centers offshore or to reduce employment levels at those call centers.

CWA had argued in a recent filing with the FCC that T-Mobile and MetroPCS have already admitted there will be "job reductions" due to the proposed merger.

"The synergies that potentially could unfold and that are being currently touted by T-Mobile and MetroPCS are indeed euphemisms for firing workers, and CWA believes that the numbers reflected in those documents are significant, not small," the CWA wrote in a recent filing.

In an official response to Tuesday's ruling, CWA said it hopes T-Mobile USA will keep its word on retaining current employee levels.

"T-Mobile has now said publicly that the "synergies model" they shared with the Federal Communications Commission assumes no layoffs, and we’ll hold them to that," CWA wrote in an official statement.

The next necessary elements in making the merger official will be the approval from MetroPCS shareholders, as well as from the Committee on Foreign Investments because Deutsche Telekom is a German company.

In other mobile news

AT&T has confirmed this morning the availability and pricing for the new BlackBerry Z10 smartphone, making it the first major wireless carrier in the U.S. to do so.

Beginning tomorrow, AT&T will begin pre-sales of the Z10 for $199.99 with a two-year contract. The smartphone will be generally available for all customers through all AT&T channels on March 22nd.

The BlackBerry Z10 marks RIM's last best hope at re-entering the smartphone market and turning the company around. The Z10 features an all-touch keyboard, 4.2-inch display and an 8-megapixel camera that records 1080p HD video.

Both Verizon Wireless and Sprint have also confirmed their support for the new BlackBerry devices. Verizon Wireless said it will launch the Z10 towards the end of March, while Sprint said it won't carry the Z10, but rather the Q10, which features the traditional BlackBerry physical keyboard.

Meanwhile, T-Mobile USA said today that it will begin Z10 sales to business users today. While reviews of the Z10 have been generally positive, reports of record sales in the U.K. have come into question recently, with analysts claiming initial sales have been overblown.

In an interview last week with Bloomberg, CEO Thorsten Heins said the Z10 was doing particularly well in India, selling out in just two days.

In other mobile news

HTC announced its consolidated revenue for February totaling $385 million, marking a 44 percent drop from the $685 million it posted in February of last year.

Total consolidated revenue for January through February of this year totaled $908 million, a drop from the $1.25 billion it posted in 2012 for the same period.

In February of 2011, HTC posted more than $1 billion in unaudited revenue. The Taiwanese handset maker has recently fallen on hard times in the global smartphone market.

At the end of 2012, HTC only controlled about 4.6 percent of the total market, down from 10.3 percent at the end of 2011, according to recent numbers from IDC, which estimates that HTC shipped 32.6 million smartphones in all of last year.

Overall, IDC’s 2012 fourth quarter numbers for its global smartphone market share indicated that Samsung and Apple together controlled more than 50 percent. IDC'S top five list was rounded out by Huawei, Sony and ZTE.

HTC’s recently announced new flagship smartphone, the One, is due for U.S. release on T-Mobile, AT&T and Sprint next week.

The U.S.’s largest wireless provider, Verizon, has yet to set a release date for the smartphone. It will be interesting to see if HTC manages to pull itself out of this situation in the coming quarters.

In other mobile news

British wireless service provider 'O2' has launched the first of its mobile-based telecare services in the U.K. Most of the services currently provided by pendant alarms are connected to traditional landlines, and their reach doesn't extend far enough for most people.

But research now reveals that many elderly patients feel trapped in their homes by alarms which connect to a landline, and as a consequence exercise less and become sick sooner. The device used in O2's "Help at Hand" service is the GPS-enabled Pearl+ made by Oysta technology. It has a support button, four quick call buttons and a fall alarm.

Falling or depressing the blue button puts the device into speakerphone mode and connects the user to a call centre. The system also provides buildings and staff, rather than being subcontracted.

Receptionists in the call centre will decide on how to field the call. They can give over-the-phone advice – although not medical advice – or more typically call a friend or relative or the emergency services.

In extreme circumstances, they will link the user to the emergency services or their nominated contact. The system is principally aimed at carers who worry about the target user for Help at Hand. The carer can be sent a text message when the user needs to charge the phone.

The carer can then define a geo-fence, so that if the user strays outside a certain field, the alarm is sent. The user can also program the quick dial keys with the numbers of friends and relatives.

Calls made on this system are billed separately on a pay-as-you-go contract. The device has a phone number that can be used for incoming calls.

Unfortunately, carers are often old themselves and may well struggle with the web-centric ways of doing all these things. The user or carer is expected to put the SIM in the phone and log into a web portal to program the numbers for the quick-dial keys and leave contact details for the call centre as to who to call in an emergency.

The system's pricing is pretty much in line with pendant alarm systems at about $26 a month, but it’s significantly more than what SmarTone charges for its Help Now service in Hong Kong or the 38 shekels a month Orange Israel charges for its “Gold” service.

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There is an initial £99 price for the mobile handset which is a bit steep for a device which doesn’t have either hearing aid inductive coil support or a desktop charger – both of which are very important for the community at which it is aimed.

It is however significantly cheaper than the similar service from Buddi. 'O2' will be selling the device online, through O2 stores and through Sainsbury’s pharmacies. The use of pharmacies is interesting because it’s the channel the French MVNO Bazile uses.

The operator might find itself having a tough time selling into the U.K. mobile retail trade where the major chains are keen to retain a young profile for their customer bases.

To be sure, O2 has been testing the system for a couple of years with about 200 local users. While the company accepts that most of the users will be older, it's keen to show the benefits for comparatively younger people, perhaps those with early onset Alzheimer’s, multiple sclerosis or epilepsy.

With around seven million people in the U.K. acting as carers and an aging population, there is a very great need for the service.

O2 refused to be drawn on targets but it’s very much a commercial venture and not a corporate social responsibility play, and this could present a few challenges down the road.

In other mobile news

For the first time this year, global shipments of smartphones will exceed feature phone shipments, according to an annual report published by IDC.

Original equipment manufacturers are expected to ship almost 919 million smartphones in 2013, or 50.1 percent of the total mobile phone shipments globally.

According to the IDC report, the shift will be driven largely by a few emerging markets that are just now making the switch to smartphones.

Additionally, IDC notes that smartphone shipments to China, Brazil, and India will comprise a growing percentage of the device type's volume in each forecast year as well.

“Overall, smartphone demand is burgeoning in these populous nations as their respective economies have grown. This has made for a larger middle class that is prepared to buy more smartphones,” the report states.

Melissa Chau, senior research manager of IDC Asia/Pacific, says that China will be at the forefront of driving smartphone sales.

"While we don't expect China's smartphone growth to maintain as strong a pace as it has over the last two years, there continue to be big drivers to keep the market growing as it leads the way to ever-lower smartphone prices and the country's transition to 4G networks is only just beginning," Chau said.

He added that even as China starts to mature, there remains enormous untapped potential in other emerging markets like India a nd Brazil.

Overall, the shift will probably mean slower growth in the years ahead. It will be interesting to see the next IDC report when it comes out next quarter to compare the changes.

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Source: T-Mobile USA.

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