T-Mobile LTE Rollout Benefits from Failed ATandT Deal

As part of an aggressive makeover, T-Mobile is planning to offer 4G LTE service in 2013. Funding and spectrum for the plan is coming, thanks to a breakup fee AT&T had to pay from its failed acquisition of T-Mobile.

T-Mobile is about to get an LTE makeover.

T-Mobile USA CEO Philipp Humm says there are plans to spend $4 billion on a "network modernization" strategy that will include a 4G Long-Term Evolution (LTE) deployment, improvements to voice and data coverage, pursuing business-to-business (B2B) opportunities, expanding T-Mobile's sales force by 1,000 people, increasing advertising spending and attracting new mobile virtual network operator (MVNO) partners.

"We want to be known for delivering the best value in wireless because of the advanced technology we deliver at an affordable price," Humm said in a Feb. 23 statement.

Over the next two years, Humm added, T-Mobile will be "prioritizing and investing in initiatives designed to get T-Mobile back to growth in years ahead."

T-Mobile was the first top-four operator to begin offering HSPA+ [Evolved High-Speed Packet Access] technology, which, wiggling the conventional thinking of the day, it decided to call 4G. While it's the only top-four carrier without an Apple iPhone, which has certainly been a pain point, it calls itself "America's Largest 4G Network."

T-Mobile parent company Deutsche Telekom, in a Feb. 23 earnings statement, reported that the company had "operated in a challenging environment" in 2011, which is "not going to change this year."

DT Chairman of the Board of Management René Obermann added, "Our capacity for innovation, cost discipline, and readiness for change are vital assets as we prepare to master these challenges in 2012, too."

With AT&T's hopes of purchasing T-Mobile dashed€”and T-Mobile walking away from the failed deal with a compensation package of nearly $4 billion and a chunk of spectrum€”T-Mobile finds itself in a new position.

Humm, in written testimony to the Senate subcommittee overseeing the AT&T deal, had lamented the state of T-Mobile, saying that being purchased by AT&T would save it, as it lacked the resources to compete at the next level€”LTE. He told the subcommittee:

As data usage continues to explode, spectrum is becoming a constraint to our business, with T-Mobile facing spectrum exhaust over the next couple of years in a number of significant markets. Moreover, our spectrum holdings will not allow us to launch LTE. T-Mobile also lacks the low-band spectrum that would enable it to offer nationwide deep in-building coverage, particularly to reach homes in suburbs and in rural areas. In addition to these unsolved strategic issues, T-Mobile€™s parent Deutsche Telekom is not in a position to finance the necessary, large-scale investments in the U.S. for T-Mobile to remain competitive. The combination with AT&T allows T-Mobile to address these challenges as well as to realize near-term benefits for its customers.

It turns out, not combining with AT&T also allowed it to address the challenges.

Aggressive sales of 3G and 4G smartphones€”accounting for more than 90 percent of device sales during T-Mobile's fourth quarter€”have introduced still another solution: "refarming" underused 1,900-MHz PCS spectrum used for GSM for HSPA+ 4G services.

Deploying HSPA+ on the PCS spectrum not only creates new capacity for LTE, said T-Mobile, but "will harmonize T-Mobile spectrum bands with the U.S. market and international carriers."

With its refarmed spectrum and the installation of new equipment at 37,000 cell sites, T-Mobile plans to launch LTE service in 2013.

"Launching LTE next year lets us take advantage of technology infrastructure advancements," T-Mobile CFO Neville Ray said in the statement, "and benefit from a more mature LTE device ecosystem ..."

Not everyone, however, sees its late arrival as a perk. And there's still the matter of that iPhone.

"The absence of the iPhone, relatively poor network coverage and the influx of smaller carriers taking over T-Mobile€™s core customer base of young people looking for cheap service have all hurt it, as the over 800,000 customers it lost in Q4 attest," research firm Ovum's Chief Telecoms Analyst Jan Dawson said in Feb. 23 statement.

"T-Mobile will be late to the LTE party, and its coverage will lag its major competitors for some time," Dawson added. "Marketing the service will be tough when it has spent the last several years convincing its customers it is already offering 4G."