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T-Mobile USA expects continued growth, 3G rollout next year

Despite increasing competition and spectrum concerns, T-Mobile USA Inc. said it expects to continue posting around 1 million net customer additions per quarter through the rest of 2005, and with the help of upcoming spectrum auctions to begin rolling out next-generation services by the end of next year.

The carrier, which has posted around 1 million net quarterly additions since late 2003 and ended the first quarter of this year with 18.3 million subscribers, told reporters it saw plenty of growth potential in the U.S. market that has yet to achieve penetration levels posted in parts of Europe and Asia.

“I believe we can keep up this speed of growth,” T-Mobile USA chief executive Robert Dotson told Reuters. “We are a growth machine. We have to grow, grow, grow.”

T-Mobile USA noted that much of that growth will come from wireline customers cutting the cord and migrating to wireless services. The carrier added that between 10 percent and 15 percent of its customer base has cut the cord.

Analysts have noted that another strong growth segment for T-Mobile USA will be prepaid customers, which made up an increasing percentage of the carrier’s customer base during the first quarter of this year, after years of stable growth. T-Mobile USA is also reinforcing its position as the industry’s low-cost leader, recently dropping the price of its signature 1,000 anytime calling minute plans with unlimited night and weekend calling from $60 per month to $46, and to $40 in some markets.

“These developments suggest that T-Mobile may be making these changes to maintain its historical subscriber momentum,” said RBC Capital Markets telecommunications industry analyst Jonathan Atkin, who added that the changes could have a negative impact on incremental subscriber quality.

Others note that T-Mobile USA has little choice but to remain the low-price leader as it’s set to become a distant No. 4 in size among nationwide operators following Cingular Wireless L.L.C.’s recent acquisition of AT&T Wireless Services Inc. and Sprint Corp.’s pending acquisition of Nextel Communications Inc. Cingular is the largest operator with more than 50 million subscribers, followed by Verizon Wireless’ more than 43 million customers and Sprint Nextel’s nearly 40 million combined wireless customers.

T-Mobile International CEO Rene Obermann downplayed the size disadvantage, noting T-Mobile USA was able to leverage T-Mobile International’s 75 million worldwide subscriber base to gain larger purchasing power compared with its domestic competitors.

T-Mobile USA also said it plans to begin deploying third-generation services in the second half of 2006 with commercial services available in 2007. The carrier expects to deploy services using spectrum in the 1.7 GHz or 2.1 GHz bands set to be auctioned by the Federal Communications Commission next summer, though analysts note the government agency has a history of postponing such events.

T-Mobile USA recently noted it has had to delay next-generation technology deployments due to a lack of clean spectrum on its GSM-based network, but was moving ahead with upgrading its GPRS data network with higher-speed EDGE technology. T-Mobile International has reportedly set aside more than $2 billion for additional spectrum purchases.

Raymond James & Associates analyst Ric Prentiss also noted that the carrier could be looking at a more advanced “4G” technology for its new spectrum. T-Mobile International launched a trial in the Netherlands last September of Flarion Technologies’ Flash-OFDM technology that provides network speeds of up to 3.2 megabits per second and lower latency than traditional wide area cellular technologies.

T-Mobile’s Dotson also said T-Mobile USA was not interested in acquiring a regional U.S. operator to supplement its network, which-despite recent consumer awards-is considered to be inferior in scope to its competitors. Analysts have noted that an acquisition of former AWS affiliate Triton PCS Holdings Inc.-now called SunCom Wireless-could bolster T-Mobile USA’s lack of native coverage in the Southeast and Puerto Rico.

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