T-Mobile USA will launch LTE service in its AWS spectrum sometime in 2013 as it seeks to regain its competitive edge in the wake of AT&T's (NYSE:T) failed $39 billion acquisition of the carrier. T-Mobile parent Deutsche Telekom will invest $1.4 billion in T-Mobile's network this year and in 2013 to pay for the upgrades, with investments totaling $4 billion over time.
During a conference call with the media, T-Mobile USA CTO Neville Ray said that the company will actually deploy LTE Advanced (Release 10) compatible gear, and will upgrade to LTE Advanced services as soon as LTE Advanced devices are ready. "The goal is not to launch Release 8 LTE. We want to launch Release 10 compatible equipment," Ray said. He also touted the fact that the company will be the first to deploy integrated multimode radios that can handle GSM, HSPA+ and LTE.
T-Mobile, which currently operates an HSPA+42 network covering 184 million POPs and an HSPA+21 network covering more than 200 million POPs, said it will use the AWS spectrum it received from AT&T--part of the $6 billion breakup fee of the deal--to launch LTE service next year in key markets. Ray said that T-Mobile will have enough spectrum in 75 percent of the top 25 markets to roll out LTE with 10 MHz of spectrum.
AT&T is giving T-Mobile AWS spectrum in 128 market areas, including in 12 of the top 20 markets in the United States: Atlanta, Boston, Baltimore, Dallas, Denver, Houston, Los Angeles, Phoenix, San Diego, San Francisco, Seattle and Washington, D.C. T-Mobile said the spectrum will increase its average spectrum holdings in the top 100 markets from approximately 54 MHz to approximately 60 MHz. However, T-Mobile said it still needs additional AWS spectrum for a broader and deeper LTE deployment.
As part of the network upgrade, T-Mobile will install new equipment in 37,000 cell sites and will deploy HSPA+ 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.
The deployment of HSPA+ in its PCS spectrum will allow T-Mobile to harmonize that spectrum with carriers in the U.S. market and international carriers, the company said. And T-Mobile said that the spectrum refarming effort, combined with the transfer of AWS spectrum from AT&T--which the FCC still needs to approve--will then allow it to deploy LTE.
The spectrum refarming also will mean that once T-Mobile deploys HSPA+ in 1900 MHz, the resulting network will be compatible with the iPhone--meaning that AT&T customers with the iPhone could switch to T-Mobile and get the same high-speed service. However, CEO Phillip Humm added that while T-Mobile is still interested in offering Apple's (NASDAQ:AAPL) iPhone to customers, there is nothing new to announce regarding any deal with Apple.
T-Mobile's move toward LTE is critical as it tries to catch up with Verizon Wireless (NYSE:VZ), which currently covers 200 million POPs with LTE, and AT&T, which covers 74 million with LTE. Sprint Nextel (NYSE:S) intends to launch LTE by mid-year and then expand its coverage in 2013.
Analysts appeared generally positive on T-Mobile's announcement. "We believe the U.S. turn-around is the right strategy; however, it is no walk in the park," Credit Suisse analyst Jonathan Chaplin wrote in a research note. "We believe the LTE investment is sensible, and coupled with an uncongested HSPA+ network it should be comparable with the LTE networks of" Verizon and AT&T.
Chaplin also noted risks. He wrote that as T-Mobile migrates some of its 1900 MHz and AWS spectrum to the LTE network, capacity on its 2G and 3G networks will be reduced. He also noted that it may take time for customers to migrate onto the LTE network, and that the company will have to execute the transition very well to avoid negative consequences.
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Article updated Feb. 23 with additional information from T-Mobile. Sue Marek contributed to this report.