Blog Post

To Sell or Not To Sell T-Mobile USA?

Wall Street Journal is reporting that Deutsche Telekom is contemplating selling off its T-Mobile USA business, which could get as much as $30 billion from potential buyers that could include Vodafone. World’s largest wireless operator does not have a US presence though it has a partnership arrangement with Verizon Wireless. Vodafone people denied that they were even remotely interested.

The Journal says that a certain segment of DT executives believe that by selling off T-Mobile USA, T-Mobile Europe could get out of a pickle – it won’t have to spend $10 billion or so to upgrade the US networks to 3G technologies. They could get $30 billion – which is $29.999 billion for Catherine Zeta Jones and rest for the telecom assets. (Mind you, the Germans paid around $45 billion for a little company called VoiceStream to get into the US market. And they call Japanese crazy spenders!)

The money from the sale could be used to fill out holes in the European networks, buy more market share in the old continent, and perhaps expand eastward into Eastern Europe. In other words circle the wagons. The other camp sees T-Mobile USA as an engine of growth, which despite being a distant fourth is doing relatively well and adding subscribers at the rate of about one million a quarter. That’s not something to sneeze at.

I do agree whatever needs to happen, it has to happen now. So far the cheap voice prices and great customer service have helped the company outwit their bigger, somewhat lumbering rivals. I think they have put the lipstick on the pig (and no that doesn’t mean the lovely CZJ.) Once the folks get a taste of 3G in the form of EVDO or even UMTS (when that happens), the defection away from T-Mobile would be rapid. The WiFi as a 3G-option strategy doesn’t have long term legs, for WiFi is only part of the solution. WiMAX is not going to be the fix, not in the near term anyway.

If this happens, it will be yet another sesimic shift in the wireless landscape in the US which has undergone a sea change in the US in past year or so. Cingular snapped up AT&T Wireless while Sprint snapped up Nextel. We shall wait and see. Germans expect to make a decision by end of the year.
More @ Wall Street Journal.

3 Responses to “To Sell or Not To Sell T-Mobile USA?”

  1. Jesse Kopelman

    Om, a service that was EDGE everywhere and WiFi where available could be very attractive vs. the current generation of EVDO/UMTS. It would cost T-Mobile surprisingly little to roll this out. SUre it has no long term legs, but it could buy them the breathing room to wait for some better pricing on 3G/WiMax equipment. Then there is UMA. T-Mobile could use this technology to form a partnership with the likes of Comcast or TWC and lock up several million more customers through the power of bundling (i.e. make your T-Mobile phone your only phone but get VoIP pricing when you use it at home / hot spot network). Hell, if the UMA phones start siphoning traffic off of the T-Mobile GSM network, there is your freed up spectrum for UMTS. If T-Mobile can continue to think outside the box they will do well, but if their plan is to just play follow the leader with Verizon and Cingular they should sell out now while the voice business is still very valuable.

  2. Jesse Kopelman

    In response to CS: Selling spectrum is stupid. The giant companies that previously got it for free still get it, but now have less money to spend on actually building a network. Yes, Cingular and Verizon have been hoarding spectrum (less so Cingular because they are trying to run multiple non-integrated networks simultaneously) and so are Sprint and Nextel (with that 2.5 spectrum they are constantly running trials in instead of launching a real service). For that matter there is all this perfectly usable 2.3 GHz spectrum that the likes of Comcast bought in 1998 that is sitting unused. T-Mobile USA seems to also want to hoard spectrum as they keep saying they want to acquire more to support 3G when, outside of a few cities, they don’t need it. The thing about T-Mobile is that yes, they are doing great at selling voice, but they are terribly positioned to sell data. Their lifespan as a cash cow is very finite, so now is the time to capitalize on it. That said, I’d rather be running T-Mobile USA than Cingular right now, as that merger is turning into an Iraq like quagmire from a network point of view.

  3. Charlie Sierra


    The $45B DT paid for Voicestream, now T-Mobile USA, was top of the bubble paper, ie a stock for stock transaction. So the excessive cost, if any, was born by DT shareholders.

    Presumably, this latest deal talk is a CASH deal. Very different terms.

    I don’t have the interest to crunch the numbers, but I think the issue of DT overpaying and if so, by how much, is still unsettled territory.

    What is depressing about this turn of events, is the fact that T-Mobile USA has already passed Nextel to become the 4th largest carrier, and most likely just surpassed Sprint PCS to become the 3rd largest carrier, at the end of June.

    Hmm, interesting.

    Frankly what this begs is a re-examination of the FCC’s policy of selling spectrum. How does selling spectrum benefit subscribers? Isn’t it just another hideous form of double taxation? Has the FCC ever published a detail account of the nation’s cellular and PCS spectrum. Are VZW and Cingular hoarding spectrum?

    I get a sick feeling that the FCC has absolutely no clue as to the mess they’ve made, and we will suffer with.