Deutsche Telekom (Pink: DTEGY) and Metro PCS Communications (NYSE: PCS) have agreed to merge in a bid that could create the No. 4 U.S. mobile carrier. Based on current accounts, it would have 43.2 million U.S. customers.

The move would allow T-Mobile USA, of Bellevue, Wash., a unit of Deutsche Telekom, to fold into Metro PCS, of Richardson, Tex., in a new company called T-Mobile. The new company would remain public, allowing the German company to sell its 75 percent share over time.

"The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage," said Deutsche Telekom CEO Rene Obermann.

Last year, Deutsche Telekom tried to sell T-Mobile to AT&T Inc. (NYSE: T), the No. 1 telecommunications carrier, in a deal that collapsed after the U.S. Justice Dept. opposed it on antitrust grounds. The new deal will still require regulatory approval and won't even be completed until mid-2013, the parties said.

The new T-Mobile will be headed by John Legere, now CEO of T-Mobile Metro PCS CFO J. Braxton Carter will be CFO. Plans for Metro PCS CEO Roger Linquist, 71, weren't announced.

The takeover is intended to save about $7 billion in costs over time, the parties said, and deliver five-year compounded growth of 3 percent to 5 percent in revenue, 7 percent to 10 percent in earnings before special charges and 15 percent to 20 percent in free cash flow.

Sharesholders of Metro PCS will get a $4.09 payment from Deutsche Telekom, then see their shares halved. In the same deal, Metro PCS will acquire all of T-Mobile USA. Deutsche Telekom will then own 74 percent of the new T-Mobile, which will be heavily bankrolled by the German partner to start.

Deutsche Telekom announced it would roll over some of the companies' $15 billion in senior unsecured notes, extend a $500 million credit facility and offer an extra $5.5 billion "backstop commitment" to tide over some of Metro PCS's current financial commitments.

The German telecommunications giant said it intended to invest in long-term evolution (LTE) technology for the enlarged T-Mobile.

The takeover of Metro PCS, a company whose initial backers included John Sculley, the former CEO of Apple Inc. (Nasdaq: AAPL), is a major boost for a company that targeted lower-income customers who didn't want to sign long-term contracts.

The other major carriers, headed by AT&T, the Verizon Wireless unit of Verizon Communications (NYSE: VZ) and Sprint Nextel Corp. (NYSE: S), all require contracts. Since incorporation in 2004, Metro PCS had grown into the No. 5 U.S. wireless carrier.

The takeover could also send Sprint scrambling for a merger partner. The Kansas City, Kan., carrier hasn't reported a profitable quarter since 2009.

The complicated transaction also represents a bonanza in fees. Financial advisor Morgan Stanley (NYSE: MS) is working for Deutsche Telekom, with legal advice from three separate law firms including Wachtell, Rosen, Lipton & Katz.

Metro PCS is working with JPMorgan Chase (NYSE: JPM) and Credit Suisse (NYSE: CS) along with Evercore Partners (NYSE: EVR). Among five law firms advising it is Gibson Dunn & Crutcher.

Shares of Metro PCS, which rose 18 percent on Tuesday, fell 8 percent to $12.48 in Wednesday trading. Shares of Sprint rose a penny to $4.91 on speculation it might seek a partner. Shares of Leap Wireless International (Nasdaq: LEAP), another small carrier, plunged 16 percent to $6.39.