Deutsche Telekom subsidiary T-Mobile USA is set to join forces with MetroPCS, as part of a new deal between the two organisations.
The two operators confirmed they have signed a definitive agreement to enter into a combined company that will retain the T-Mobile name.
They say the move will enable the new company to compete more aggressively with rivals in the domestic wireless sector while also improving the experience of customers.
The newly expanded T-Mobile will offer a wider range of products and services at a competitive price, the organisations said, as well as better network coverage.
Under the terms of the transaction - which is structured as a recapitalisation deal - MetroPCS will declare a one for two reverse stock split.
MetroPCS shareholders will receive an overall cash payment equivalent to €1.16 billion, which equates to around €3.16 per share, before the reverse stock split.
The company will acquire all of T-Mobile's capital stock by issuing to Deutsche Telekom 74 percent of MetroPCS's common stock on a pro forma basis.
As part of the deal, Deutsche Telekom will roll its existing inter-company debt into new €11.6 billion senior unsecured notes of the combined company.
Deutsche Telekom will also provide a €386.5 million unsecured revolving credit facility to the combined company and a €4.25 billion backstop commitment for certain MetroPCS third-party financing transactions.
Commenting on the deal, Informa Telecoms & Media principal analyst Mike Roberts said it will increase T-Mobile's total subscriber base by 28 percent to 43 million, while its market share will increase from 10 percent to 13 percent.
"More importantly, the deal would strengthen their position in the value segment where both companies are focused, with the new company having 23 percent of the US prepaid market, given T-Mobile USA's share of 20 percent and MetroPCS with three percent," he added.