T-Mobile USA plans to spend its way to contention as a must-have wireless carrier.
The nation's fourth-largest wireless carrier said Thursday it'll invest $4 billion in the next two years to build a faster network in hopes of stanching an exodus of customers.
In the first disclosure of the company's strategy since a proposed merger with AT&T fell through last December, T-Mobile CEO Philipp Humm says growth plans, on hold while the outcome of the deal was unclear, are gearing up.
T-Mobile received $3 billion and additional wireless airwaves, or spectrum, from AT&T as part of the breakup agreement. Those resources will be used to build the next generation of a mobile network based on a technology standard called 4G LTE. The company plans to introduce the network gradually to the top 50 markets next year.
While T-Mobile currently offers a type of 4G service, it uses another wireless standard, known as HSPA+. Analysts say that LTE — used by Verizon Wireless and AT&T — is faster and more attractive in wooing the lucrative base of customers who download videos and large business files.
"They've been struggling to retain and grow their customer base," says Carrie MacGillivray, a telecommunications analyst at IDC. "There was a lot of consternation about what is going to happen to the merger."
T-Mobile lost 1.65 million subscribers last year. About half left in the last three months of the year after its Big 3 national competitors began selling the iPhone 4S. Only T-Mobile does not offer the popular iPhone in its lineup.
Because the network upgrade will make it compatible with iPhone, striking a deal with Apple to sell the popular phone "is a possibility," Humm says. But for now, the carrier will focus on smartphones using Google's Android and Microsoft's Windows Phone operating systems, he says.
"Its phone (lineup) doesn't necessarily lend itself to high-end customers," MacGillivray says.
Federal regulators, citing antitrust concerns, squashed AT&T's bid to buy T-Mobile from its parent company, Deutsche Telekom, for $39 billion.
"We have frankly suffered under the AT&T deal," Humm says. While shareholders wanted the merger done, it would have been "a bit like handing over a painting that wasn't finished," he says in an interview.
Since the merger's demise, analysts have called on T-Mobile to upgrade its network and offer more phone choices. "It is taking up that gauntlet, although a bit on a budget," says Rich Karpinski, an analyst at Yankee Group. "But is it enough, and is there still time?"
T-Mobile also plans to spend $200 million more on advertising this year, hire 1,000 salespeople and remodel its retail stores.
The company's monthly wireless plans are known to be less expensive than others.
But the new ad campaign will tout its technology upgrade. Humm says the perception of affordability "is not enough."