T-Mobile Leaps to LTE
Without an LTE network or iPhones to offer users, T-Mobile has been bleeding customers. But the concessions it could receive from AT&T's failed attempt to buy it last year may enable the company to reinvest in its network and step up its smartphone sales. For starters, T-Mobile plans to pump $4 billion into an LTE buildout.
Feb 24, 2012 10:47 AM PT
The "network modernization" strategy will also include improvements to voice and data coverage, an expansion of the company's sales force, retail store remodeling, an aggressive pursuit of business-to-business opportunities, and an increase in advertising spending.
T-Mobile revealed its plans at the same time it reported its earnings for the final quarter of 2011. The company took in service revenues of $4.57 billion, down from the $4.69 billion it brought in a year ago. T-Mobile also reported losing 526,000 net subscribers and 802,000 contract plan subscribers in the last three months of 2011. A year earlier, the company lost 23,000 net customers.
The iPhone -- specifically, T-Mobile's lack of the iPhone -- led to the significant number of deactivations, according to T-Mobile president and CEO Philipp Humm. Last fall, Sprint began offering Apple's smartphone, leaving T-Mobile the only carrier out of the four largest providers in the U.S. to not offer the device.
T-Mobile didn't respond to our requests for additional comment.
To win back some of the defectors who left to get an iPhone with another carrier, T-Mobile aims to invest heavily to make sure its network can handle the consumer demand shift from voice coverage to wireless data coverage.
"T-Mobile didn't jump into the smartphone race along with AT&T, Verizon and Sprint Nextel. They sat it out for years. They finally get it. They finally understand the future is about smartphones," tech analyst and consultant Jeff Kagan told the E-Commerce Times.
T-Mobile plans to spend $4 billion building a 4G LTE network that can handle greater wireless data demand. Over the next two years, the company will put $1.4 billion into installing new hardware at 37,000 cell sites and "refarming spectrum" for an LTE rollout. Part of that spectrum will be what T-Mobile will receive from AT&T if the FCC approves a plan the carriers agreed to following the latter's failed attempt to purchase the former.
Presently, T-Mobile's 4G coverage runs on HSPA+ technology. The company said it expects its LTE service, which it called "a more mature LTE device ecosystem," to reach the majority of the top 50 markets.
Whether HSPA+ should be referred to as a "4G" wireless technology at all has been the subject of debate.
"If some of the 3.5G technologies are operating in perfect conditions, they can achieve rates that are at the low end of the 4G range," Bill Morelli, director of mobile technologies and convergence at IMS Research, told the E-Commerce Times. "So when Sprint launched its 802.16e WiMAX network, they referred to it as '4G.' In response, Verizon started to loudly trumpet its LTE plan, and then T-Mobile, out of desperation, started referring to its HSPA+ network as '4G.' AT&T, who had yet to launch its LTE network, quickly followed suit."
In Europe, said Morelli, the 3.5G HSPA+ and 4G spectrums are still referred to separately, but most U.S. consumers don't recognize the difference in marketing.
Spectrum for the Save
T-Mobile's earnings suggest the company needs a successful LTE rollout to stay relevant among Sprint, AT&T and Verizon.
"The other networks are all well underway with their respective 4G network plans," said Morelli. "T-Mobile was already in trouble from a spectrum standpoint prior to the failed AT&T merger, and the only reason they were able to make the announcement yesterday is because they got some spectrum assets as a result of the merger tanking."
In order to keep up with competing networks, many of which have iPhones to offer customers, expanding to 4G LTE is important, but it might not be the savior the company is looking for, Morelli said.
Also, added Kagan, "If T-Mobile wants to be a player, they have to update their technology and be a key player in the smartphone space. However, they also need to update their brand, create a new message for customers and investors. Let the world know they understand the changing marketplace. Let the world understand going forward they are a wireless data leader. T-Mobile's future is in their own hands."