T-Mobile USA and Dallas-based MetroPCS Communications Inc. (NYSE: PCS) have agreed to merge.

The deal is structured as a recapitalization, with MetroPCS declaring a reverse stock split, making a $1.5 billion cash payment to its shareholders, and acquiring all of T-Mobile’s stock by issuing T-Mobile’s parent, Deutsche Telekom (XETRA: DTE), 74 percent of MetroPCS’ common stock.

The combined company will retain the T-Mobile name and is expected to have $24.8 billion in revenue for 2012. It will be headquartered in Bellvue, Wa., where T-Mobile is currently based.

With 42.5 million subscribers, the combined company will still be fourth in market share, behind Verizon Communications Inc. (NYSE: VZ), which has 111 million subscribers; AT&T Inc. (NYSE: T), with 105 million; and Sprint Nextel Corp. (NYSE: S), with 56.4 million.

Last year, AT&T proposed to buy T-Mobile for $39 billion, but the deal, which brought together the second and fourth largest players, was stopped by regulators who argued it would reduce competition, limit consumers’ choices in wireless providers and raise prices for mobile services.

By contrast, regulatory approval for the merger between T-Mobile and MetroPCS, which brings together two struggling wireless providers, is considered likely.

JP Morgan and Credit Suisse Securities (USA) LLC acted as financial advisers to MetroPCS. Evercore Partners acted as the financial adviser to MetroPCS’ board of directors’ special committee, while Akin Gump and Fulbright & Jaworski acted as counsel. Gibson Dunn & Crutcher LLP, Paul Hastings and Telecommunications Law Professionals are MetroPCS’ legal counsel. 

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