T-Mobile USA undecided on 4G strategy as prepaid war mounts
Published: 13 October, 2009
READ MORE: US | T-Mobile | LTE
The US operators are gradually formulating their 4G and mobile broadband strategies, even as the profitability of their existing 3G systems increasingly comes under pressure from a prepaid price war.
With Sprint ahead of the field via its Clearwire venture and Verizon Wireless in hot pursuit using LTE, AT&T has a more cautious, but fairly clear, upgrade schedule - leaving T-Mobile, as in 3G, the laggard. The German owned cellco is only just achieving major coverage with its HSPA network, and its parent Deutsche Telekom is still weighing up the options with regards to 4G, according to CFO Timotheus Hoettges.
Speaking to Bloomberg at a conference in Frankfurt, Hoettges said the carrier's US arm had three options, all under consideration. One, probably the simplest should TMo decide it needs to move quickly to LTE or WiMAX, is to enter a partnership. The operator has already been linked with a possible deal with Clearwire, to create a mutual MVNO similar to that of Sprint (though it is unclear how Sprint itself, the largest shareholder, would accommodate a rival, in an alliance that will give it most of its competitive edge in advanced services). TMo could also consider a network sharing agreement, like those becoming common in European LTE, perhaps with a tier two carrier such as would-be early LTE adopter MetroPCS. Since TMo is spectrum constrained, it would mainly provide funding in return for access to frequencies and networks.
The other two options open to TMo USA are to wait for new spectrum licenses to be auctioned or to buy licenses from another company. "That is not yet decided," Hoettges said. "We have to consider all options."
However, he does not think there needs to be further consolidation in the US, and played down speculation that Deutsche Telekom might pursue a merger or joint venture strategy, to boost its US arm's market share, as it has done in another of its pressurized markets, the UK. "There are four national players in the US market for 300m households, while in Europe, where we have 350m households, there are 50-70 operators," he told Bloomberg. "We believe in our chances of being the challenger."
Meanwhile, T-Mobile has increasingly been forced to participate in the prepaid market - which is generating growth, while crushing margins, in the US - and to respond to an escalating price war. While the big two cellcos initially stayed aloof, as TMo and Sprint chased flat rate specialists MetroPCS and Leap, even they want a share of the prepaid action now. AT&T has unveiled its least expensive prepaid plan to date, sending shares in Leap and MetroPCS downwards. Its unlimited plan offers calls and text messages for $60 a month under its GoPhone tariff - not that aggressive compared to the smaller cellcos, but still taken as a sign that AT&T may get more serious about prepaid. Leap's stock fell nearly 7% on the news to $16.08, while MetroPCS fell 4.5% to $8.
"While not directly competitive on price, this offer provides a stake in the ground for AT&T, and could ultimately result in even greater price competition across the segment," William Power, an analyst at Robert W Baird & Co, told Dow Jones.
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