FRANKFURT/NEW YORK – Deutsche Telekom is in advanced talks to combine its T-Mobile USA unit with MetroPCS, three sources familiar with the situation said on Tuesday, as the German telecoms group seeks to stem a decline in customers at its U.S. business.
"A deal is close," one source said, while another person said an announcement could follow later on Tuesday. A third person said a press conference was prepared for Wednesday.
Deutsche Telekom declined to comment, while MetroPCS was not immediately available for comment.
MetroPCS shares traded 21 percent higher at 1526 GMT.
Deutsche Telekom tried to sell its U.S. business T-Mobile USA, once a strong growth engine, to AT&T for $39 billion but fierce regulatory opposition scuppered the deal, leaving the German company with a $6 billion breakup package.
Ever since the AT&T deal collapsed, Deutsche Telekom has been looking for a solution for the unit which has to compete with much bigger rivals Verizon Wireless, AT&T Inc and Sprint Nextel.
In the second-quarter T-Mobile USA lost 205,000 customers in the United States and is expected to feel the pressure from the launch of the new iPhone, which it will not be selling in the U.S.
Speculation that T-Mobile USA and MetroPCS were considering a merger have come up in the past although analysts have pointed out that the two companies run on different technologies.
MetroPCS as well as rival Leap Wireless caters to cost-conscious customers but has been feeling the heat as bigger rivals such as Sprint enter their low-cost phone markets.
Shares in Sprint fell 5.4 percent upon news of the possible tie-up between its rivals.
(Additional reporting by Arno Schuetze in Frankfurt, Nicola Leske in New York and Leila Abboud in Brussels; Editing by Elaine Hardcastle)
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