T-Mobile’s plans to launch LTE in 2013

T-Mobile USA has announced plans to invest US$4 billion – the same amount it should receive from AT&T due to its failed takeover of T-Mobile – to modernize its mobile network and launch LTE in 2013, in a bid to stay competitive in a US mobile market rapidly moving to LTE. It’s the right move for T-Mobile USA and an embarrassment for AT&T, which set out to tighten its grip on the US mobile market by acquiring T-Mobile USA but ended up funding the potential revival of a competitor.

Deutsche Telekom’s negotiators are looking savvy in retrospect as the stiff breakup fee they negotiated with AT&T looks tailor-made to fund their LTE deployment, with some US$3 billion in cash and US$1 billion in spectrum rights. The spectrum is particularly vital since T-Mobile USA did not previously have enough spectrum to deploy LTE. However, a breakup fee of some sort was clearly justified since T-Mobile has been in limbo since the acquisition was announced in early 2011, with its strategy frozen and market share declining.

T-Mobile USA’s new network strategy is sound but faces major challenges. First, T-Mobile describes the new spectrum from AT&T as the “catalyst” for its move to LTE, which is accurate, but T-Mobile USA is still short on spectrum and will have to refarm existing spectrum to use for LTE. This will not be easy and creates technical challenges and risks not faced by Verizon Wireless and AT&T, which are deploying LTE in new spectrum. Second, T-Mobile USA does not have the financial firepower to keep up with the LTE and other investments of its larger rivals Verizon Wireless and AT&T. Third, T-Mobile USA is playing catch-up with its rival Sprint, which is already well underway with its plans to launch LTE this year.

Other aspects of T-Mobile USA’s new-challenger strategy include pursuing the B2B segment, which is a typical aspiration for mobile operators but one that is very hard to execute. Similarly, T-Mobile’s plan to attract new MVNO partners is sound but its major rival Sprint has been pursuing a similar strategy for several years.

Overall T-Mobile USA’s new strategy is sound but its execution will be the key to reviving the operator’s fortunes in the US mobile market.

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