T-Mobile/MetroPCS merger could spur VoLTE innovation

T-Mobile USA's acquisition of MetroPCS (NYSE:PCS) has the potential to bring about technological innovations in the U.S. mobile marketplace and accelerate the deployment of advanced services, according to analysts.

Spectrum and LTE are keys to the merger's success and future potential. "We will increase our contiguous spectrum for LTE by 40 percent by the end of 2013," said T-Mobile CEO John Legere, noting the combined company will be able to offer 20x20 MHz LTE in many metro areas. The operators have complementary 1900 MHz and AWS spectrum holdings.

The combined company will be able to offer 20x20 MHz LTE in many metro areas.
For more slides from the merger report, click here.

Despite the fact that T-Mobile is a GSM-based operator while MetroPCS is a CDMA operator, Legere emphasized that this massive merger will not have the same problems that haunted Sprint's (NYSE:S) acquisition of Nextel Communications in 2005, which attempted to bring together two dissimilar networks--CDMA and iDEN.

"Our strategy is to transition the MetroPCS customers to the combined company's network and refarm MetroPCS' spectrum. We are not, I repeat not, going to smash together two networks with differing technologies," said Legere.

"We expect a rapid migration in the convergence to a common LTE standard and the rapid turnover of handsets, which is as much as 60-65 percent of the MetroPCS base" annually, he said. "That makes this possible very quickly."

All MetroPCS customers should be migrated to the combined company's common network by the end of 2015.

Chris Kissel, analyst with Multimedia Research Group, agrees that the merger is well timed in terms of technology paths. Despite the fact that T-Mobile and MetroPCS use different 3G technologies, "this deal doesn't feel similar (to Sprint's Nextel acquisition) because there is a known migration path for both MetroPCS as well as for T-Mobile. They're both going to LTE anyway," he told FierceBroadbandWireless.

"There really isn't a gating factor about a merged company running two separate networks. That should only be a concern over a couple of years. By the time LTE is mature (and) by the time VoLTE is mature, there should be an easy transition plan to make the merged company work," said Kissel.

MetroPCS launched VoLTE service this summer in the Dallas-Ft. Worth market and last month pledged to have VoLTE in all 14 of its LTE markets within the next six months.

"I think it's going to be cool for T-Mobile to add exposure to VoLTE," said Kissel. "Obviously as T-Mobile starts to make its network optimization, this is going to be a good thing."

However, T-Mobile does not have the same capacity constraints that were pushing MetroPCS to aggressively adopt VoLTE, said Susan Welsh de Grimaldo, director of mobile broadband opportunities at Strategy Analytics. "Part of MetroPCS' need to do that was that they needed to refarm quickly to LTE, so they wanted to use VoLTE to get voice into their LTE stream quickly. I don't think there will be that same pressure at T-Mobile with their strong HSPA network. So they may not have that same pressure to move quickly."

Nonetheless, T-Mobile should be well positioned if it wants to offer cutting-edge services positioned around VoLTE and Rich Communication Suite (RCS). "As they look to create innovative marketing plays around their LTE holdings, that's where I think we will see some interesting things start to happen," said Welsh de Grimaldo. "This won't be technology just for technology's sake to get the voice migrated over, which was the real MetroPCS push, but it'll be about what they can do to position in the market around new services."

She added such innovative new services could play well in T-Mobile's new push to attract small and medium-size businesses to its network.

"The combined company will also be the first carrier with contract handset financing and bring-your-own-device plans," said Legere, who noted the operator will be able to drive unlimited data plans as a key differentiator and become the leading provider of monthly no-contract services.

The merger deal potentially benefits T-Mobile's current network suppliers--Ericsson (NASDAQ:ERIC) and Nokia Siemens Networks. The former is already MetroPCS' sole LTE infrastructure supplier infrastructure supplier and has been doing  VoLTE work for MetroPCS (along with Mavenir, Acme Packet, Hewlett-Packard, Amdocs and Genband), while Nokia Siemens has been very involved in small cells via its Liquid Net portfolio as well as refarming, said Welsh de Grimaldo.

However, MetroPCS' other primary infrastructure supplier, Alcatel-Lucent (NYSE:ALU), which Kissel noted signed a $500 million CDMA network supply contract in December 2007, could once again get left out in the cold when it comes to future upgrade action for the new combined operator.

The deal also has implications on the backhaul front, where T-Mobile has been a leader in getting backhaul upgrades in place. "T-Mobile has done so much to build out a really strong leased fiber backhaul network. They've done a ton of work on that. I think MetroPCS was a bit behind on their backhaul, and they've been recently looking into doing a lot more with microwave," said Welsh de Grimaldo.

Due to T-Mobile's involvement, small microwave backhaul vendors will have "a different landscape" to deal with, she added.

For more:
- see this release
- see this Strategy Analytics blog entry

Special Report: T-Mobile USA and MetroPCS merge: Complete coverage

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Article updated Oct. 3, 2012, to list additional vendors that have been working on MetroPCS' VoLTE initiative.