With its voice-related revenues and new subscriber additions slowing, and data revenues that lag those of its rivals, the U.S. arm of German phone giant T-Mobile needs a fast-acting picker-upper. Its answer may lie with the Google phone.
At a special event in New York on Tuesday, T-Mobile USA will become the first carrier to show off a Google Phone — a device that is made by HTC and uses Google’s (s GOOG) Android operating system. The much-awaited phone has the potential to give T-Mobile the same turbo boost the iPhone gave to AT&T.
Allow me to explain how T-Mobile has made clear it thinks the Google phone can be its iPhone. To begin with, T-Mobile senior managers were the first to publicly hail the Google phone and their belief in the new business model that could result.
…that it is not an easy game to penetrate the wireless market without the help of the operators, which has led to collaborative relationships…The biggest challenge is to adapt our market perspective and business model to one based on partnerships, content and applications. Historically, wireless carriers had a relatively simple business model — end-to-end voice service — with correspondingly simple billing. That is no longer the case.
Secondly, The Wall Street Journal reported back in June that the first working model of the Google phone wouldn’t hit the market till November 2008. In its report, the WSJ indicated that T-Mobile was taking up too much of Google’s resources, leading to some grousing by other partners. Then came the surprise announcement that the device would be launched tomorrow. Taken together, it’s reasonable to assume that T-Mobile fast-tracked the device.
Now to why T-Mobile needs the lift at all. First, the number of subscribers it’s adding is slowing down. In the second quarter of 2008, the U.S. arm of T-Mobile added 525,000 new subscribers vs. 875,000 additions in the second quarter of 2007. That’s the lowest level of adds since 2006 for T-Mobile USA, which currently has about 31.5 million subscribers.
And when it comes to the more lucrative data revenues, T-Mobile USA has lagged its bigger rivals. The company has been especially hampered by its lack of a 3G network, which has forced it to make do with a blend of EDGE and Wi-Fi networks. According to Chetan Sharma Consulting, 3G subs have more than $23 in data ARPU. In the second quarter of 2008, the firm estimates that, on average:
Verizon lead in data ARPU with $12.58 (or 24.41% of the revenues) closely followed by Sprint at $12 (or 21.4354%), AT&T at $11.59 (or 22.91%) and T-Mobile at $8.60 (or 17%).
T-Mobile can quickly change all that with the Google Phone, which like the iPhone is very data-centric and utilizes the web. (Read about the keynote Google’s Rich Miner gave at Mobilize.)
The carrier has been rolling out its 3G network just ahead of the Android launch. And T-Mobile USA has to be hoping that the new phone, which will be launched tomorrow but won’t go on sale at retail outlets for a few weeks, will make people pause before reaching for the hot-selling iPhone from AT&T.
T-Mobile USA started rolling out its 3G network in New York City in May, saying the service would be available in 13 markets. Last week they said they’ll offer 3G in an additional 21 markets to coincide with the launch of the Android phone. (I am told San Francisco will see the launch of T-Mobile USA 3G before the end of this month.)
T-Mobile’s 3G network works on different frequencies than AT&T’s, which means there are only a handful of devices that can really use this AWS-based network. In order for people to start using it, T-Mobile needs a device that can do for it what the iPhone has done for AT&T — something like the Google phone.
What do you guys think?