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T-Mobile has received approval for its $2.4 billion purchase of SunCom Wireless, a regional carrier that primarily serves the southeastern US, an Associated Press report said.

The company is a wholly owned subsidiary of German telecommunications giant Deutsche Telekom, the report said.

SunCom, based in Berwyn, Pa., serves 1.1 million customers in North Carolina, South Carolina, Tennessee, Georgia, Virginia, Puerto Rico and the US Virgin Islands.

The companies announced the buyout in September, the Associated Press report said.

In its decision, the Federal Communications Commission said the transaction would serve the public interest by promoting competition and enable T-Mobile to “expand its wireless footprint” in the Southeast and the Caribbean.

The companies said they expect the deal to close by the end of the month, the report said.

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T-Mobile USA and SunCom Wireless Holdings have signed a definitive merger agreement through which T-Mobile will acquire all outstanding common stock shares of SunCom for around USD 2.4 billion in cash and assumed debt. This sum includes a cash payment of around USD 1.6 billion and net debt of USD 0.8 billion. The deal will allow T-Mobile USA to expand its network coverage into south-eastern US and the Caribbean. SunCom is active in North Carolina, South Carolina, Tennessee, Georgia, Puerto Rico and the US Virgin Islands. SunCom operates a GSM/GPRS/EDGE network and has provided roaming service to T-Mobile in these markets since 2004. The deal will expand T-Mobile USA’s network coverage from 244 million PoPs to 259 million PoPs. It also expects to realise synergies with a net present value (NPV) of around USD 1 billion Mobile USA also expects to realize synergies with a net present value (NPV) of approximately $1 billion through reduced roaming and operating expenses. SunCom had over 1.1 million customers at end-June, up over 105,000 from end-June 2006, with contract customers accounting for over 95 percent.

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Fitch Ratings says that Deutsche Telekom’s acquisition of SunCom Wireless in line with its announced strategy grow its international mobile operations and will have no impact on its Long-term Issuer Default rating (IDR) of ‘A-’ (A minus) with Negative Outlook and Short-term IDR of ‘F2′.

Deutsche Telekom announced an acquisition of SunCom Wireless Holdings, a niche US mobile provider, for US$2.4 billion in cash and assumed debt. At end-H107 SunCom served 1.1 million subscribers by operating a GSM network in four south-eastern states, Puerto Rico and U.S. Virgin Islands.

Fitch notes that this acquisition makes a good strategic addition to Deutsche Telekom’s existing US mobile assets. Deutsche Telekom is gaining access to 11 new regional markets, taking its total coverage to 98 out of 100 top markets. The acquisition will also result in substantial cost savings given that Deutsche Telekom has extensively relied on SunCom’s roaming services since 2004.

Deutsche Telekom estimates the net present value of expected synergies at US$1 billion.

Deutsche Telekom announced plans to divest of US$4.2 billion of non-core assets and reinvest the proceeds in acquisitions. As of end-H107 divestments amounted to US$1.7 billion. Fitch earlier noted in its credit analysis report that if the total acquisition spend is limited to the size of expected divestments, the resulting impact on ratings is likely to be neutral.

Fitch notes that the announced deal is likely to lead to a small increase in leverage , primarily due to the still low EBITDA generation at SunCom and high valuation multiple but also reflecting a relatively small transaction size. SunCom generated negative EBITDA in Q106; for 2006 EBITDA was US$48.8m on revenues of US$669.7m, implying only 7.3% margin. The valuation multiple reflects expectations of future growth and yet-to-be-achieved synergies, which intrinsically entails substantial execution risks.

The Negative Outlook on DT reflects concerns over the company’s ability to stabilise domestic revenues and earnings in view of continuing fixed-line losses and mobile average revenue per user dilution . Fitch is also concerned if DT can achieve sufficient international growth to compensate for the pressures in Germany.

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European telecoms carrier Deutsche Telekom said on Monday it will acquire SunCom Wireless Holdings, a longtime roaming partner of its T-Mobile arm in the U.S. for $2.4 billion in cash and assumed debt.

The deal will help fill out T-Mobile’s wireless coverage in five southeastern states including the Carolinas and Georgia, along with Puerto Rico and the U.S. Virgin Islands.

The deal will also position T-Mobile, the fourth largest cell phone carrier in the U.S., for an upcoming wireless spectrum auction, which could have fundamental impact on the mobile market, according to one analyst.

Deutsche Telekom will pay $1.6 billion for SunCom and assume $800,000 of the Berwyn, Pennsylvania-based carrier’s debt.

In return, the Bonn-based telecoms giant will gain more than 1.1 million subscribers and annual revenue of $242.5 million for its U.S. arm.

“T-Mobile is essentially cleaning up some of the blank spots on its map, gaining more spectrum, and getting more customers,” said Peter Gorham, an independent wireless analyst.

The addition of SunCom’s spectrum will put T-Mobile in a better position to supplement its coverage when it bids on highly coveted 700 MHz spectrum slated to be auctioned by the U.S. government early next year.

The 700MHz spectrum is particularly attractive because the strength of the signal means carriers can service a wider area with fewer cell sites. Carriers are expected to use 700 MHz spectrum to support third generation, or 3G, services such as broadband Internet access and video.

“So the 700 MHz spectrum auction could be crucial to T-Mobile. They need it to deploy 3G,” said Mr. Gorham.

T-Mobile is an amalgamation of carriers including VoiceStream, Aerial Communications, OmniPoint, and Powertel, which along with a patchwork of roaming agreements, was fashioned into a national carrier in 2001.

Mr. Gorham said that T-Mobile had to sell of swaths of spectrum to fund many of those acquisitions, leaving the carrier with thin coverage in many markets.

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The US cellular operator T-Mobile USA has agreed to pay USD1.6 billion for smaller rival SunCom Wireless. T-Mobile, a subsidiary of Germany’s Deutsche Telekom, will also assume around USD800 million of SunCom’s debt. The deal is expected to close in the first half of next year.T-Mobile sees synergies from the transaction of around USD1 billion. SunCom has over 1.1 million subscribers in the south-eastern United States, the US Virgin Islands and Puerto Rico, while T-Mobile USA has almost 26.9 million customers nationwide. Deutsche Telekom’s chief executive, Rene Obermann, commented: ‘With the acquisition of SunCom, we will continue to implement our strategy to grow abroad with mobile.’

T-Mobile’s US cellular rivals AT&T and Verizon Wireless have both enlarged their businesses through the acquisition of smaller operators in recent months; AT&T is awaiting regulatory approval for its purchase of Dobson Communications, while Verizon has bought both Rural Cellular and Ramcell.

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