It’s no big secret that Deutsche Telekom hasn’t been very pleased with the performance of its American wireless arm, T-Mobile USA. In September, we reported that the German telecom giant was considering a merger with Sprint — shortly after T-Mobile UK merged with Orange to create the largest wireless company in the UK.
Now The Wall Street Journal is reporting that Deutsche Telekom is considering an initial public offering for T-Mobile USA — a move that’s meant to help save the struggling fourth-ranked carrier. According to anonymous sources, DT has had talks with a few banks to fund the IPO. The proceeds from the deal would likely go towards expanding T-Mobile’s network in the United States. A final decision from the company on how it intends to move forward, as well as what it would do the extra cash, is expected in the next few months.
T-Mobile was the last US cellular provider to roll out a 3G network, and even Deutsche Telekom has admitted that the company has lost subscribers due to the lack of 3G availability. Even though it got off to a slow start, T-Mobile is working hard in 2010 to roll out what would be the fastest 3G network in the US, featuring 21Mbps HSPA+ technology. In comparison, AT&T plans to bring its 3G network only up to 7Mbps speeds by the end of 2011.
Unlike other US carriers, T-Mobile hasn’t yet announced any 4G network plans.
At this point, an IPO seems far more likely for T-Mobile, rather than any sort of merger. It would be too costly to merge the carrier’s GSM-based network with Sprint’s CDMA technology to be worthwhile. AT&T, the only other major GSM provider, is an unlikely candidate for a merger — especially considering that T-Mobile’s 3G operates on a different frequency than AT&T’s.
Even with an IPO, it remains to be seen if T-Mobile can compete with the likes of AT&T, which has seen its subscribers grow steadily thanks to the iPhone, and Verizon, whose 3G network is widely regarded as the best in the US. 2010 looks to be a particularly good year for Verizon — given the arrival of the Palm Pre and Pixi, more high-end Android phones (including the current T-Mobile exclusive, the Nexus One), and potentially even the iPhone (if AT&T loses exclusivity).
Whatever Deutsche Telekom decides, it’s going to be an uphill battle for T-Mobile in 2010.
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