T-Mobile Invests in LTE Development…But Why?

by Matt Klassen on February 28, 2012

Before the ongoing AT&T acquisition saga began last year T-Mobile found itself perched perilously on the edge of the abyss of irrelevance. Without a competitive LTE 4G network and being the only one of the Big Four carriers have to offer the iPhone, T-Mobile was, and still is, hemorrhaging customers at an alarming rate.

In fact, following the collapse of the AT&T acquisition deal many wondered if T-Mobile could survive at all, offering little to attract new customers and having many of its regular subscribers jump ship for better selection, better rates, or simply to avoid becoming a slave to AT&T.

Rather than fade quietly into the night, however, T-Mobile has decided to go on the offensive, investing heavily in expanding its current data network and developing a new LTE network as well. But is this move a sign that T-Mobile is ready to compete in the smartphone sector, or simply a little polish designed to make America’s fourth largest wireless carrier an attractive option for potential suitors?

For several years now T-Mobile has virtually sat on the sidelines of the smartphone race, watching competitors both big and small develop advanced wireless networks and secure deals to offer the most advanced smartphones on the market. Of course such stagnation comes as little surprise when your parent company, in this case Deutsche Telekom, has made no secret of the fact that it wants nothing to do with you.

But following the company’s earnings report for the final quarter of 2011, which saw T-Mobile’s overall revenues down to $4.57 billion from $4.69 billion a year ago and a reported net loss of 526,000 subscribers (with a total of 802,000 contract subscribers, the most lucrative kind of subscriber) in the last three months, it was obvious that maintaining the status quo, especially in light of the influx of money from AT&T, simply wasn’t an option.

In an effort to make itself more attractive to customers (and likely to potential buyers as well) T-Mobile has developed a $4 billion“network modernization” strategy, that aside from creating a 4G network will also see improvements to voice and data coverage overall, an expansion of the company’s sales force as well as remodelling its brand and retail stores, an aggressive pursuit of enterprise clients, and an increase in advertising spending.

While this strategy is much needed for a company that has long been playing catch-up in the smartphone market the question remains, are network improvements enough to stop the mass subscriber exodus and actually win back some of the defectors? In a word, no.

The problem for T-Mobile is that while creating a 4G network is an absolute must, once it is created the company will still barely be on par with its chief rivals Sprint, AT&T, and Verizon, saying nothing about the fact that T-Mobile still offers a relatively paltry selection of smartphones and still finds itself on the outside of Apple’s iPhone party.

In fact, while network speed, coverage, and reliability are all vitally important for consumers, the fact that soon all four of America’s top wireless carriers with have functional LTE networks will mean that it will become almost a non-factor in choosing a carrier. What will really sway subscriber opinion will be options, particularly when it comes to smartphone choices and contract bundle selection, and that’s an area whereT-Mobile still can’t compete.

So why the big investment if it will only see minimal gains? You can bet that selling off its American subsidiary is still a priority for Deutsche Telekom, and what better way to improve the value and attractiveness of its key American asset than to put some polish on T-Mobile’s network.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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