Deutsche Telekom/MetroPCS - emergent force It is hard to see how the acquisition of a company with an enterprise value of under $8bn could make much of a difference to an important global industry. But Deutsche Telekom's long-rumoured takeover of MetroPCS, if consummated, will have an impact out of proportion with its dollar value. Rumours that a deal is imminent sent PCS shares up by nearly a fifth on Tuesday. Buying the US prepaid wireless company could provide Deutsche Telekom with a publicly traded vehicle to put its own US operations into. These generate more than $5bn a year in earnings before interest taxes, depreciation, amortization and could have a value of, say, $30bn. Deutsche Telekom would be very happy to convert some of that value to cash, as it sees its best growth opportunities outside of the US. The merged company would also become a substantial force at the low end of the US market. It would have 42m subscribers, 18m of those on low-priced pre-paid plans. That is almost 4m more than the current leader in prepaid, Sprint. Sprint could get squeezed. It lacks the resources to compete with giants AT&T and Verizon at the high end - it has already leveraged itself up to upgrade its network and its capital spending remains a fraction of its larger rivals" - and could now face a bigger low-end competitor, too. How many costs Deutsche Telekom can take out of the combined company, and therefore the price it will ultimately pay, is a complicated question. The two presently use different wireless technologies, which will slow integration. On the other hand, as Bernstein Research points out, the spectrum holdings of the two companies are very much complementary. And the benefits of scale in wireless extend to billing systems, marketing, handset purchasing, and so on. Deutsche Telekom can pay up for PCS and still come out ahead.