NEW YORK—Following its $4.2 billion worth of spectrum auction winnings, T-Mobile USA Inc. announced plans to spend $2.6 billion to upgrade its network to 3G technology. The carrier said it has already been working with 3G handset and equipment vendors for months to get moving on the buildout, and that its commercial roll-out will begin in mid-2007 and be complete by 2009.
T-Mobile said it has already rolled out about half of the necessary equipment to launch UMTS services in New York.
The carrier estimated its capital expenditures for 2007 to 2009 will be just under $9 billion—substantially less than analysts had expected for a 3G, company executives pointed out. The new UMTS network will be “HSDPA-ready” and is a “natural evolution” of T-Mobile’s GSM network technology, they noted.
“The reason it’s cheaper for us is, we’re going to be able to deploy 3G right on the … footprint we have today,” said Robert Dotson, chief executive officer of T-Mobile USA. He said that since the size of UMTS equipment has decreased, T-Mobile will be able to utilize most of the sites it already has for the roll-out. And, he noted, the cost of 3G equipment and handsets has come down since the technology was initially introduced.
“I would be shocked if any other company has anything close in terms of cost of deployment and cost of equipment,” Dotson said.
The announcement comes as little surprise. Industry watchers had expected T-Mobile USA to bid aggressively in the Federal Communications Commission’s spectrum auction—the carrier spent more on spectrum than any other bidder—and to then use that spectrum to launch a 3G network. T-Mobile essentially doubled its spectrum capacity in the top 100 U.S. markets through its auction winnings, company executives said at a press conference in New York.
“The acquisition of additional spectrum is an important step forward for us. Not just for T-Mobile USA but for the Deutsche Telekom Group, which benefits from the growth of its U.S. business. We are aiming to maximize revenue market share and make T-Mobile USA the largest single company within the group,” said Kai-Uwe Ricke, DT’s chief executive officer.
T-Mobile USA contributed 22 percent of DT’s overall revenues in the first half of this year, up from 16 percent in 2004.
T-Mobile USA currently operates a GSM/GPRS/EDGE network. The carrier’s U.S. rivals, including Verizon Wireless, Sprint Nextel Corp. and Cingular Wireless L.L.C., are in the midst of rolling out much faster networks that can support more voice calls and various multimedia applications.
Dotson said that T-Mobile USA is focused on “taking existing habits into the mobile environment,” such as social networking, user-generated content and e-mail for the mass wireless market. The company also would not “pour resources” into mobile TV for its current deployment, he added. Specifically, executives said T-Mobile would not use Qualcomm Inc.’s MediaFlo mobile TV technology in Europe, and would instead use the DVB-H transmission standard.
T-Mobile USA also recently started a new advertising campaign with the tagline “Stick Together.” The company plans to start emphasizing network quality as well, with a series of market-specific ads touting its dropped-call prowess. T-Mobile USA says it has the “fewest dropped calls across the top 35 markets.”
Cingular Wireless L.L.C. also has been promoting itself as the national carrier with the fewest dropped calls, leading to an advertising dispute with Sprint Nextel Corp.
