MetroPCS' COO on the pros and cons of the AT&T/T-Mobile deal

with Tom Keys, COO of MetroPCS
with Tom Keys, COO of MetroPCS

The wireless industry has been closely watching no-contract carrier MetroPCS' (NASDAQ:PCS) LTE deployment, it's launch of the first Android-based LTE smartphone and its innovative Metro Studio content package. At the CTIA Wireless 2011 in Orlando, Fla., last week FierceWireless Editor in Chief Sue Marek sat down with Tom Keys, COO of MetroPCS, to talk about what AT&T's (NYSE:T) proposed $39 billion acquisition of T-Mobile might mean for the company, what its plans are for more LTE smartphones and how MetroPCS is progressing with its VoLTE trials.

FierceWireless: Do you think AT&T's proposed acquisition of T-Mobile will get approved by regulators?

Keys: My impression is that they seem very confident that the deal will go through. Our view is that this deal takes away another competitor in the marketplace.

FierceWireless: Does that mean this acquisition will be good for MetroPCS?

Keys: It could have positive results. It depends on what happens in the next 12 months. We will see what both companies do. At Metro, our goal is to keep our head down and keep executing. We will keep building out our markets and building our brand. It only intensifies our efforts.

FierceWireless: Do you think there might be an opportunity for MetroPCS? If the device roadmap for T-Mobile customers is unclear or they become unhappy, they might be willing to leave.  

Keys: It might be an opportunity for customers if they are feeling that there might be a jumpball coming up when their contract is up and are trying to figure out what they want to do. Our belief is that it is not postpaid vs. prepaid, it is contract vs. no contract. If MetroPCS can give potential customers a postpaid experience without a contract, we enhance our chances to attract new share.

Additionally, if you look at the OEM environment, they have one less customer, so I suspect we will get an increased set of focused eyes on what our business can give to them.

FierceWireless: And if there are concessions in this deal, there may be an opportunity for spectrum to be purchased?

Keys: That's speculation right now. But if there is an opportunity for spectrum that has to be divested to get this deal done, we will certainly take a look at it.

FierceWireless: MetroPCS has said that it might consider a wholesale relationship with LightSquared if LightSquared can get its LTE network built. Leap Wireless just revealed that it has signed a long-term roaming deal with LightSquared. Does this recent development change or alter MetroPCS' plans?

Keys: Anything that happens with Leap does not dictate our direction. We will continue to be opportunistic when it comes to spectrum and see what is out there and we will act accordingly. The fact that Leap has a deal with LightSquared does not create more motivation for us to act.

FierceWireless: MetroPCS recently joined the Rural Cellular Association, which has been steadily increasing its members. Why did you decide to do that?

Keys: We are still fairly new to the organization. We don't know the positives we can bring to the organization or what it will bring to us. But we thought it was important to join it. We think it's a big initiative and we want to support smaller operators in a world that is only getting smaller and bigger. By that I mean operators are getting smaller in number and bigger in size.

FierceWireless: One possible outcome of T-Mobile being acquired by AT&T is that you are losing another powerful player in the initiative to get the FCC to require data roaming. Is that a concern?

Keys: We will continue to lobby to get equitable data roaming rates. We think that is important in the industry. If spectrum is going to be a scarce resource then we are going to fight to get equitable data roaming rates across the country for all operators.

FierceWireless: How is uptake of Metro Studio? 

Keys: It has enjoyed very good success. It is part of our $60 per month LTE 4G rate plan. Customers enjoy it. There are 18 channels right now, and we believe we can expand that with other content partners. Video is very popular with our customers.

FierceWireless: Mobile video has always been a struggle for operators--it's difficult to get the business model right. What are you learning from your customers?

Keys: We think it's about snacking. And that snacking will be different for everyone. This gives you a convenient way to do that at your discretion.

FierceWireless: You recently launched one Android LTE smartphone. What is MetroPCS' plan in terms of offering other operating systems on LTE smartphones?

Keys: We can't deny the popularity of the open operating system such as Android. We believe it is what consumers want. But we want to work toward a $200 LTE Android phone. We are working with every OEM on that. We want to bring LTE to the masses. And we want other LTE operators to be successful. If we can get more LTE devices in the ecosystem, we can get more OEMs to build LTE devices and we can see the cost curve come down.

We go to Asia a couple of times a year and we talk with all the OEMs. We will launch more LTE devices this year by other OEMs.

FierceWireless: Voice over LTE (VoLTE) is very important for MetroPCS. Is the ecosystem for VoLTE developing as you had hoped?  

Keys: We will be trialing it this year. The important thing for us is to get voice to ride over LTE and then for MetroPCS we want to refarm that spectrum dedicated to CDMA and then bring in LTE carriers in the base station to give us greater capacity on the LTE carriers vs. CDMA carriers. That's a bigger issue for us than the spectrum issue. As we get to VoLTE and can move voice to LTE then we can have great capacity. This is all in the plan.

FierceWireless: You are trialing this year. Will you launch in 2012?

Keys: Yes, launch in 2012. We are trialing and testing VoLTE this year.

FierceWireless: What is the big issue for you in the year ahead?

Keys: It's execution. We out execute everyone in our business model. We are a low-cost provider. We have the lowest CPU [cost per user] of any carrier. We have the lowest CPGA [cost per gross addition] of any operator and we spend the least amount of marketing dollars to get customers. That's why we have the EBITDA [earnings before interest, taxes, depreciation and amortization] margins that we have. Our goal doesn't change. We just have to continue to execute the business model, providing wireless for all. We will take that to providing Android for all and then finally providing LTE for all. 

FierceWireless: A lot of analysts--both industry analysts and financial analysts--have been saying that AT&T's acquisition of T-Mobile is just the tip of the iceberg, and we will soon see other consolidation among operators. And they always point to MetroPCS as a possible merger candidate with Leap Wireless. Do you think that will happen?

Keys: That's speculation from other folks. Historically we did make a run at Leap, but it didn't work. So we went about our business. But the foundation of our company and the philosophy of [Chairman and CEO] Roger Linquist is that we are not afraid to jump into the water when we place our bet. We did that with LTE and we think it will benefit us.

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