DT CFO: T-Mobile USA can stand alone
Declaring that parent company Deutsche Telekom has a plan to move T-Mobile USA forward as it transitions to LTE, Deutsche Telekom CFO Timotheus Höttges said the carrier is "not a problem" for the company.
Speaking at the 40th Annual J.P. Morgan Global Technology, Media and Telecom Conference, he said that in the aftermath of AT&T's (NYSE:T) failed $39 billion acquisition of T-Mobile, DT took the $6 billion breakup fee, including AWS spectrum in 128 markets, and developed a path forward.
"There's always a perception that if these guys are selling an asset it must be a problem child," Höttges said. "It is not a problem for us. And that is due to the fact that we have a clear path toward LTE. It is definitely a big opportunity in the marketplace."
The DT CFO said that the $1.4 billion the company will spend this year and next year to upgrade T-Mobile's network--and the $4 billion in investments over time--will be all "self-funding" and come from cash flow T-Mobile generates in the United States. He said at the end of the network upgrade, T-Mobile will have 2X10 MHz channels for LTE in almost every one of its markets, which he said will give the company a strong spectrum position through 2017 or 2018.
"There is no need for us to enter into any kind of deal at this point in time," he said, seemingly throwing cold water on the speculation that DT might try and merge T-Mobile with prepaid player MetroPCS (NYSE:PCS). "We have cash flow. We are investing $4 billion."
Höttges noted that T-Mobile has started implementing a challenger strategy on pricing, and that the prepaid market has grown significantly even as the postpaid business has suffered. However, he noted that the market for Android smartphones is growing, that T-Mobile has a largely unloaded HSPA+ network with fiber backhaul, and that "we could really play with this capacity."
He also said as part of the company's rebranding it will "approach the market with new propositions," especially for small and medium businesses. He also said T-Mobile will cut $900 million in costs, which could then be partially reinvested in the business.
T-Mobile plans to deploy LTE on its AWS spectrum. As part of its network upgrade, by the end of 2012 T-Mobile will deploy HSPA+ services in its PCS 1900 MHz spectrum band, which it is currently using for 2G GSM services (the carrier's HSPA+ network currently runs on T-Mobile's 1700 MHz AWS spectrum). The company said it will continue to support 2G customers as it refarms the spectrum. T-Mobile said network modernization trials have shown a 33 percent improvement in HSPA+ data speeds and in-building signal penetration.
Due to the refarming, T-Mobile has said that in the fourth quarter unlocked Apple (NASDAQ:AAPL) iPhones on its network will get HSPA+ 1900 MHz support. Currently, customers who bring unlocked iPhones to T-Mobile can only get 2G EDGE data speeds, since the iPhone does not support T-Mobile's 1700 MHz AWS spectrum.
Höttges said that T-Mobile's forthcoming LTE network, which will run on its AWS spectrum, will be supported by major chipset makers. The carrier has been somewhat hobbled by its HSPA network on its AWS spectrum since some manufacturers--mainly Apple--do not support it. Thus, Höttges said T-Mobile could get an LTE iPhone in 2013.
"We hope that we would get a decent portion without being forced into a huge volume commitment. That is something we cannot afford," he said. "We hope that we can help grow Apple's business in the U.S. without a different chipset."
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