The deal is structured as a recapitalization in which Dallas-based MetroPCS will declare a 1 for 2 reverse stock split, make a cash payment of $1.5 billion to its shareholders and then acquire all of T-Mobile's common stock by issuing Deutsche Telekom 74% of its equity.

Bonn, Germany-based Deutsche Telekom has also agreed to roll its existing intercompany debt into new $15 billion senior unsecured notes of the combined company, provide the combined company with a $500 million unsecured revolving credit facility and provide a $5.5 billion backstop commitment for certain MetroPCS third-party financing transactions.

The companies said the combination, which will retain the T-Mobile name, would create a stronger number four player in the U.S. wireless market with expanded scale, spectrum and financial resources to better compete against industry leaders AT&T Inc. and Verizon Communications Inc. Combined the company would have about 42.5 million subscribers and generate about $24.8 billion in revenue and $6.3 billion in adjusted Ebitda in 2012.

But the transaction could also cause some headaches, as the carriers each currently deploy different wireless standards so their networks are not compatible.

Deutsche Telekom CEO René Obermann in a statement said the deal "enhances Deutsche Telekom's position in the expanding U.S. wireless market," saying the combined company will be a stronger competitor than either could on its own.

"The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate, especially around the next-generation LTE network," Obermann said. "We are committed to creating a sustainable and financially viable national challenger in the U.S., and we believe this combination helps us deliver on that commitment."

The companies expect to shave upwards of $7 billion in annual costs as part of the deal. Current T-Mobile CEO John Legere would remain in that role post merger, with Braxton Carter, currently chief financial officer and vice chairman of MetroPCS, expected to be CFO of the combined company.

The deal comes a year after T-Mobile's planned $39 billion sale to AT&T was struck down by regulators. A merger with MetroPCS would create a publicly-traded currency for T-Mobile which Deutsche Telekom could use to sell down its stake over time, or as a currency to further expand its U.S. arm.

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