T-Mobile USA may have had a horrible fourth quarter while its merger with AT&T(s T) suffered its death throes, but the operator is definitely taking advantage of the aftermath. T-Mobile is using the breakup fee and spectrum it won from AT&T to funnel $4 billion into LTE. The 4G service will go live in 2013, but only after T-Mobile goes through a rather complex process of shifting its networks among its different bands.
The news emerged early on Thursday morning when T-Mobile’s parent company, Deutsche Telekom, reported earnings, its first since its $39 billion sale of its U.S. operations to AT&T was canned. T-Mobile shed 802,000 net contract customers in the fourth quarter, which the company ascribed to huge competition from the new iPhone 4S(s AAPL). T-Mobile is now the only major U.S. operator without an iPhone to offer its customers, but it made do with the smartphones it does have. An astonishing 92 percent of all device sales were 3G and 4G smartphones, totaling 2.6 million device activations in the quarter.
That increasing shift away from text-and-talk devices to smartphones is driving up data plan sales as well as data consumption. So T-Mobile has decided to go for broke and build the LTE network that until now seemed so out of reach. Getting to LTE won’t be easy, because the operator doesn’t have the unused spectrum set aside like its competitors AT&T and Verizon Wireless(s vz)(s vod). Instead, it will have to carve out chunks of frequencies that are being used by its HSPA and GSM networks.
T-Mobile is helped by the huge shift in its customer base to 3G and 4G devices. Those devices connect primarily to its HSPA and UMTS networks, which support voice services as well as data and thus take traffic off its GSM networks. T-Mobile will start shutting down parts of its GSM networks and move portions of HSPA+ networks into the gap left behind. Moving some of its HSPA+ off the advanced wireless service (AWS) band will make room for LTE.
T-Mobile will also benefit from the treasure trove of spectrum it won from AT&T as part of its breakup fee. The AWS isn’t in one consistent nationwide block, but it will go a long way to adding capacity to the fledgling LTE service.