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    Home Latest News
    • Mobile

    T-Mobile Will Miss Out Because They Dont Get It

    By
    Guy Kewney
    -
    August 29, 2005
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      Britains old Cellnet phone operator, now called O2, reminds me of my fathers car.

      I once bought a car from my father. I didnt particularly want the car, actually, but I was damned if my sister was going to get it. So I bought it. And it now looks as if T-Mobile and Telefonica are caught up in a similar sibling rivalry to buy O2.

      Like my fathers car, O2 isnt all that valuable in itself. My father, when he was planning to sell the car, didnt waste his own money on maintenance; as long as the thing passed its basic roadworthiness tests, he felt hed spent all he needed to.

      The result was that the car was worth more on paper than it was to the buyer. On paper, it was a lovely red beast with one careful owner and regularly maintained. In reality, it had high mileage and a history of “bargain” parts like water hoses and filters and brake linings. In short, no investment in the future beyond what was necessary.

      The trouble is, neither T-Mobile nor Telefonica can afford to see the other acquire it.

      /zimages/3/28571.gifResearchers chase away worms, Wi-Fi bandits at Intel. Click here to read more.

      T-Mobile would, effectively, be demoted from a Tier One to a Tier Two telco if Telefonica got the UK and German networks of O2; and the penalties, in terms of the way the investment community would see it, would be immense.

      Telefonica might not face quite the same humiliation, but it really would like to see a major rival downgraded—even if it had to pay $25 billion for the purpose.

      The trouble, Deutsche Telekom executives say, is that before they could actually do anything with O2 customers (like, keep them!) theyd have to spend another $5.4 billion or more buying new brakes, shock absorbers and exhaust systems to replace the make-do work that has been carried out in low-rent garages in the last couple of years, while the board members whose shares are now vested realised that they needed to bail out.

      Conventional wisdom says that O2 is actually worth very little indeed—a conclusion I understand. Its been doing things like going for “content” sales on a margin which is astonishingly big—but, unfortunately, negative—not because its a good idea, but because everybody else wanted to do that, and O2 customers were attracted away—particularly by Vodafone.

      But—at the serious risk of being regarded as a dolt by my peers—I have to say, in the last six months or so, its been dawning on me that actually, O2 has made some pretty good and market-aware decisions, and that T-Mobile is starting to make me wonder if they even know what market theyre in.

      The collapse of the Simpay project is an excellent example.

      Simpay was going to create a costly pan-European (eventually, global) system for taking much of the cash out of the economy, and turning it into e-cash over phone networks. It was costly—in the sense that money had to be raised up front—and it fell apart earlier this year when all the partners voted for it, bar one.

      That one, though nobody reported this at the time, was T-Mobile. It is beyond understanding, unless you assume either that T-Mobile simply couldnt afford the million dollars it would have had to invest, or that T-Mobile simply couldnt understand the need for, or the attractive returns possible with, the Simpay system.

      Me, I go for the second. I think T-Mobile has lost its marbles, its way and the race for the future, simply because it is having to focus entirely on saving money.

      That, I suspect, is why insiders are saying that T-Mobile wont buy O2. Not because they dont have the money (they dont have the money, by the way!) nor because they understand that the price is absurd, even—but because they honestly dont see the advantages of buying it, nor the penalties theyll suffer if they dont.

      Contributing columnist Guy Kewney has been irritating the complacent in high tech since 1974. Previously with PC Mag UK and ZDNet UK, Guy helped found InfoWorld, Personal Computer World, MicroScope, PC Dealer, AFAICS Research and NewsWireless. And he only commits one blog—forgiveable, surely? He can be reached at guy.kewney@gmail.com.

      /zimages/3/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis on mobile and wireless computing.

      Guy Kewney
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