Deutsche Telekom and MetroPCS are planning to merge their U.S. mobile operations, creating the fourth largest mobile provider in the U.S. The boards of both companies have approved the deal and helps Deutsche Telekom achieve the scale it needs for its T-Mobile business to compete with AT&T (T) and Verizon (VZ).

A deal between T-Mobile and AT&T was stopped by regulators who believed it would have led to higher prices and a reduction in competition. The deal, which is considered a reverse merger, will see the smaller MetroPCS purchase T-Mobile U.S.

MetroPCS will declare a 1 for 2 reverse stock split and make a cash payment of $1.5 billion to its shareholders. Deutsche Telekom will own 74% if the new entity while MetroPCS shareholders will own the remaining 26%. The combined company will be called T-Mobile and will be led by current T-Mobile head John Legere.

MetroPCS (PCS : NYSE : US$12.24), Net Change: -1.33, % Change: -9.80%, Volume: 66,715,695