Deutsche Telekom’s T-Mobile has banked on being the first operator to launch the much-hyped Google Android phone. But that strategy’s falling short for at least one of its subsidiaries. Today, Deutsche Telekom reported that its mobile division lost $849 million, including a write-down of $2.4 billion in assets at T-Mobile U.K.
This performance does nothing to dispel rumors that T-Mobile U.K. may be put up for sale. The operator has yet to confirm anything, but sources say that minority shareholder The Blackstone Group and the German government (part owner of the carrier) have turned up the heat to prompt more immediate returns on their investments.
The British company has been running a series of jaunty advertisements playing on the “flashmob” concept: A huge group of people gathers at a public place after receiving a time/date/place via text message, and then proceeds to rock out en masse. But the exuberance of this marketing campaign belies the company’s grim financial position.[youtube https://www.youtube.com/watch?v=mUZrrbgCdYc&hl=en&fs=1]
T-Mobile is the second largest mobile operator in the U.K., with 16.8 million subscribers, according to communications regulator Ofcom. But it also has the lowest average revenue per user (ARPU) at about $58 — compared to ARPUs in the $75 to $85 range enjoyed by other leading European operators like Vodafone, O2 and Orange.
The Google effect is also losing steam. The G1 certainly encourages higher rates of data use, but the spike hasn’t been enough to pull T-Mobile out of the doldrums. The company says it has sold some 100,000 G1s since they hit the market in the U.K. six months ago, outstripping sales of other handsets. But if you read between the lines, that only means that nothing else has been selling very well. To compare the launch of the G1 with that of the iPhone, which is offered exclusively through O2 in the U.K., the latter sold just under 200,000 units in its first two months. O2 had been the country’s leading operator even before the iPhone, and it still is.
Despite these setbacks, T-Mobile U.K. is forging ahead (at least for now). Today, it announced the appointment of Richard Moat to the post of managing director (he was chief executive of Orange Romania). And it will be the first operator to offer the G1 software upgrade, Cupcake 1.5, expected to hit the U.S. a week later. The package includes improvements to the phone’s camera (adding video capabilities), web browsing and GPS functions. The company says it also plans to release a new Android phone before the end of the year.
In any case, T-Mobile’s hold on Android is now at an end, with Vodafone now also offering the devices. It will be interesting to see if new Android phone models pick up the same momentum that the iPhone has in the U.K., or if they become another set of novelty devices in what is already an over-saturated and cash-stretched market.