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    It’s Time for Deutsche Telecom to Think About Plan B for T-Mobile

    By
    Wayne Rash
    -
    September 7, 2011
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      Perhaps the most stunning revelation to come out of the mess surrounding the filing of antitrust lawsuits by theU.S. Department of Justice and Sprint Nextel is the fact that T-Mobile’s owner, Deutsche Telekom, apparently doesn’t have a Plan B.

      Apparently, it never occurred to DT’s German ownership that the U.S. government would have other ideas. This is perhaps the best illustration that Deutsche Telekom never really understood Americans or the U.S. business environment. Perhaps now they’re getting a glimmer.

      Of course, it’s possible that AT&T convinced DT’s managers that this merger was a done deal-that once AT&T spread some of its billions of dollars around the U.S. political scene, there would be no opposition. If DT believed that, then that’s yet another indication that they really didn’t understand the U.S. The problem is, when the merger is turned down-and it will be-T-Mobile is left without any place to go.

      Don Reisinger suggested that T-Mobile should merge with Sprint, but that option is fraught with problems ranging from market concentration to incompatible networks. There has also been a suggestion thatGoogle should buy T-Mobile, which could make sense, if only because that would let Google have its own mobile means of application and data delivery to go with its hardware and software businesses.

      After all of this, would T-Mobile be in a position to pick up the pieces and move forward on its own? Interestingly, it might. If you’ve been watching what T-Mobile is up to lately, you’d see that the company is aggressively seeking new business; it’s started up a new small and medium business effort, and it’s offering a lot of new phones to go with T-Mobile’s ads that claim the largest, fastest 4G network in the U.S. This doesn’t sound to me like a company that’s ready to throw itself into the arms of the next available suitor.

      It’s also worth noting that there are a number of things that T-Mobile hasn’t done while the legal maelstrom has swirled around it. One thing it hasn’t done is comment on much of anything. While T-Mobile’s Washington, D.C., lobbyist has spouted the AT&T party line a couple of times and Deutsche Telekom has said that it’s committed to the merger, T-Mobile itself has said nothing. The company has simply continued to introduce new phones, including the first 4G BlackBerry. An internal memo has urged employees to proceed on course, as if the merger didn’t exist.

      A Minority Investment Is the Best Solution

      T-Mobile USA, it seems, has already examined the prospects of a successful merger with AT&T, and is prepared for life without AT&T, regardless of what its parent in Bonn might be up to. Preparing to go it alone is probably T-Mobile’s best bet for long-term success right now. The merger is pretty much gone, despite what AT&T’s bluster might suggest.

      Plus, there will come a time when AT&T will have to fork over all that new spectrum that it promised as part of the consolation prize if the merger didn’t pass muster with the feds. That new spectrum will likely satisfy T-Mobile’s needs for Long-Term Evolution (LTE) technology.

      T-Mobile has LTE? Indeed, it does. In Europe, T-Mobile and Vodafone are the big LTE providers. While Deutsche Telekom may not have moved its LTE technology to the U.S., the company has it in abundance in Germany and elsewhere in Europe. Once the merger issue is resolved and given enough spectrum, there’s no reason T-Mobile USA, still owned by DT, can’t simply use the parent company’s existing LTE technology in North America.

      Of course, it will take a while to build out LTE in the U.S., given T-Mobile’s late start, but it has 42M bps Evolved High-Speed Packet Access (HSPA+) to provide for interim high-speed data connections. So a move to LTE is certainly possible for T-Mobile; it has the technology and the knowledge. But would parent firm DT want to invest more money into the U.S. market when it’s trying so hard to divest its U.S. property so it can take its cash and go home to Germany? It might.

      Let’s say, for example, that Google has decided that it doesn’t really want to be a carrier in addition to making phones. Now, suppose that in return for a significant investment in T-Mobile, Google asks for the LTE build-out so that it has a faster way to deliver the data and search services it sells. Suddenly, DT’s financial exposure to the U.S. market is reduced, it has someone else to pay for the LTE deployment, and it will have a lot of marketing help in adding subscribers and selling services.

      While it won’t grant Deutsche Telekom’s wish to bail out of the U.S. market, it will make it a lot less painful to stay in. And it will give Google a way to ensure that it has the medium to distribute its products without being limited by AT&T’s Draconian data plans. Suddenly, it’s looking like more of a win-win for everyone involved, and a minority investment by Google probably won’t even trigger an FCC hearing. Who could ask for more?

      Wayne Rash
      https://www.eweek.com/author/wayne-rash/
      Wayne Rash is a freelance writer and editor with a 35-year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He is the author of five books, including his most recent, "Politics on the Nets." Rash is a former Executive Editor of eWEEK and a former analyst in the eWEEK Test Center. He was also an analyst in the InfoWorld Test Center and editor of InternetWeek. He's a retired naval officer, a former principal at American Management Systems and a long-time columnist for Byte Magazine.

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