Analysis: T-Mobile USA has done right but may be sold by parent wanting more

By , Computerworld |  Mobile & Wireless, T-Mobile

Given everything T-Mobile USA has done right -- launching cool new smartphones, 3G wireless network upgrades, hot marketing, and low-cost pricing plans -- some experts wonder why its parent company may be considering spinning it off .

It seems to come down to the fact that its German parent, Deutsche Telekom, is conservative and risk-averse, mirroring the philosophy of its biggest shareholder, the government of Germany, which controls about 30% of the company.

"Because of that government control, they don't want to play around and they want to get money for their investments and show some return," said Will Stofega, an analyst at IDC.

Deutsche Telekom is reported to be exploring an initial public offering, spin-off or merger with a rival of its U.S. unit, but the German carrier and T-Mobile USA won't comment on the report, which cited unnamed sources.

T-Mobile has about 33 million customers in the U.S., and is No. 4 in the country's wireless market, with about 14% market share behind No. 1, Verizon Wireless, No. 2, AT&T and No. 3, Sprint Nextel.

Despite all its good qualities, T-Mobile did report losing 77,000 wireless customers in the third quarter of 2009, about the same time Verizon and AT&T were each adding millions of customers.

If T-Mobile is not growing, it is hard to justify spending millions of dollars on 3G network upgrades and subsidies for new smartphones, analysts said. "This business is very cash intensive, making it difficult to bid for top handsets and it takes cash to bring customers good networks," Stofega said.

T-Mobile said in January that it had finished rolling out a faster 3G network specification called HSPA 7.2 to 200 million people in the U.S., after more than a year of development.

However, Stofega said is still a widespread perception that T-Mobile has an "inferior network" at the same time that T-Mobile "is certainly facing big guns in Verizon, AT&T and, for that matter, Sprint."

T-Mobile's network upgrade might have come too late to help, said one independent analyst, Jeff Kagan. "They are rushing to catch up ... with AT&T, Verizon or Sprint," he said. "Their speeds are not as fast in as many places."

Kagan said that T-Mobile focused too long on offering cheap wireless phone calling, instead of fast wireless Web connections, after being created in 2001 when Deutsche Telekom purchased VoiceStream Wireless.

"As the marketplace continues to change toward smartphone functionality, that's where the pressure is for T-Mobile," Kagan said.


Originally published on Computerworld |  Click here to read the original story.
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