Quantcast
Channel: Wireless Operator Strategies - Wireless Devices
Viewing all articles
Browse latest Browse all 9

AT&T Deal is Dead, Long Live T-Mobile USA

0
0

On December19th.AT&T - discouraged by massive DoJ and FCC opposition - ended its bid to add capacity with the acquisition of T-Mobile USA. This leaves AT&T hunting for alternative ways to acquire sufficient spectrum, even though it was finally able to complete the purchase of Qualcomm’s 700MHz Spectrum on December 27th.

But where does this leave T-Mobile USA?

On December 20th. Deutsche Telekom (DT) CEO Rene Obermann speaking to his own corporate blogger suggested that T-Mobile USA would need to move to LTE technology eventually;and would also require additional spectrum. He made clear however, that the $3 Billion cash settlement from AT&T would be used initially to reduce DT corporate debt not to further enhance T-Mobile USA’s network that was just upgraded in 2011 to dual carrier HSPA+ and is currently providing sufficient capacity for current customers.

Rumors of T-Mobile USA’s difficulties are exaggerated…

As of end of third quarter of 2011 T-Mobile USA served 33.7 million customers only slightly down from 33.8 million at the end of third quarter 2010. 10.1 million of those customers are now using 3G/4G smartphones up 40% from a year earlier. OIBDA margin was 31% in the third quarter of 2011, up from 28% in the third quarter of 2010 due largely to lower losses from equipment subsidies that were reduced by the launch of T-Mobile’s unlimited Value plans. These Value plans allow customers to subscribe to new services without an upfront payment for a bundled handset. These plans have reduced ‘costs per gross add’ and lowered the cost of subscriber retention.

Overall, T-Mobile USA had a slim but maintainable third quarter net income of $332 million on service revenues of $4.67 billion.

This year therefore, T-Mobile survived disruptions to its retail channels including the discontinued retail partnership with Radio Shack; handled the uncertainty of the AT&T acquisition; and held Contract Customer churn down to 2.4%, although Prepaid churn jumped to 7.2% from 6.6% between the second and third quarters.

T-Mobile is maintaining its customer base and making money.

Challenge is Migration to LTE

The challenge for T-Mobile USA is to fund future growth to compete with the three other large players in the US market – AT&T, Verizon and Sprint - as well as ‘no contract’ low cost prepaid regional operators - Leap Wireless, MetroPCS and US Cellular - all of whom are migrating to LTE.

In November T-Mobile announced that its nationwide ‘4G’ (HSPA+ at 21Mbps) network now covered 208 markets across the US reaching more than 200 million POPs.

But how will T-Mobile migrate this network and its GSM PCS customers to LTE without AT&T?

Possible Migration Path to LTE

We have reported that migration to at least a Hybrid HSPA+/LTE network is key to long term profitability. TMoNews the unofficial blog of T-Mobile USA recently described a possible low cost path for T-Mobile’s LTE migration. See: ‘Editorial: Why T-Mobile Should And Will Deploy LTE (The Technical Edition)

At this point in time, T-Mobile is just now refarming PCS spectrum. In a majority of the markets where T-Mobile has both PCS and AWS spectrum with no AWS used, it is quite likely that they will deploy HSPA+ only on PCS because most of the remaining markets only have 10MHz of AWS and 30MHz or more of PCS. AWS will likely be reserved for LTE in these areas.”

“In areas where they’ve got plenty of AWS spectrum and they’re using it for HSPA+, they’ll dedicate about 10MHz of PCS to GSM and 10MHz to HSPA+. If they have 20MHz of PCS or less in a market with lots of AWS, there will be no deployment of HSPA+ on the band, but there will be scaling back of GSM to 10MHz to prepare for LTE.T-Mobile will deploy LTE.”

 “T-Mobile USA has been preparing for LTE on their core network and backend infrastructure for over two years now. … T-Mobile USA has deployed all the necessary components to run IMS on their core network and (has) made a new Wi-Fi Calling solution that uses it. As far as we know, they are the first in the world to commercially deploy IMS for voice, SMS, MMS, and other circuit-switched services. It would be trivial for T-Mobile to change the client software to make it run over LTE or HSPA+. By preparing all the core network and backend infrastructure for LTE this far ahead, their nationwide LTE deployment costs will much lower.” 

Financing the Path to LTE

The key question is whether T-Mobile USA can finance this migration without bringing in new investors. Even if the migration could be done for as little as $6 Billion, additional spectrum will eventually be needed. DT is unlikely to provide that and is being very cautious because of concerns about European market growth and the financial risk of its 40% share of Greek telecom group OTE. DT is also planning to expand in several areas of its European business rather than in the US. 

Nor is DISH Network, who has offered to Partner With T-Mobile likely to be able to finance a T-Mobile upgrade as it focuses on its own rollout.

Meanwhile T-Mobile USA is pursuing business as usual adding ‘no contract’ plans to keep prepaid customers; and offering aggressively priced deals for the Holidays.

And Oh Yes - directly targeting AT&T and iphone4 in its Ads with its attractive T-Mobile girl – Carly Foulkes


Viewing all articles
Browse latest Browse all 9

Latest Images

Trending Articles





Latest Images