Losing customers fast, T-Mobile USA looks to calm investor's nerves
With the AT&T merger in the rear view mirror, T-Mobile USA faces new problems: mounting customer losses and a lack of clarity on its future path. This uncertainty is a negative for the company, and the carrier attempted to allay some fears on Thursday.
Late Wednesday during its earnings release, T-Mobile blamed the launch of the iPhone 4S from its three biggest competitors as the primary reason behind a massive number of defections in the fourth quarter. The carrier lost a net of 706,000 customers, which also dragged revenues down 3.3 percent to $20.6 billion.
While being the odd man out is likely the reason for a significant number of those losses, at the same time the uncertainty about the carrier's future also plays a part.
Deutsche Telekom CEO Rene Olbermann tries to put a positive spin on disappointing results by focusing on the future. "Though we are not satisfied with the contract customer losses and the decreased total revenues, the quarterly margin improvement year-on-year was impressive", he says.
"The spectrum gained through the break-up fee empowers T-Mobile USA to start LTE-based services in key US markets and strengthens its competitiveness", Olbermann concludes. As part of the breakup fee, T-Mobile received spectrum in 128 markets, including 12 of the top 20. A generous roaming agreement was also signed.
It could be argued that without these vital concessions as part of the breakup on AT&T's part, T-Mobile would have collapsed not long after the merger's failure because it would have no way to truly compete.
So where does T-Mobile USA go from here? LTE, it says. In conjunction with the earnings release, the carrier released a strategy to remake the business. The strategy will include a $4 billion investment in the network -- not ironically the breakup fee paid by AT&T to T-Mobile -- including the launch of LTE in 2013.
LTE will be available in a majority of the top 50 markets, T-Mobile says. The move seems like a last ditch effort to make the US arm of the business viable, which Deutsche Telekom has not been all that quiet about its desire to walk away from in some way or another.
Questions still remain as to how committed T-Mobile USA's German parent company is to the company's future. The money being thrown into the network improvements is money kicked in by AT&T and not Deutsche Telekom. There is obviously still more work to be done.
By 2013, it's likely that T-Mobile's competitors will be well into their LTE deployments, and likely have the next-generation wireless technology in many more markets than just the top 50. That will still put T-Mobile behind, and make it a less attractive choice to consumers, even though it may have much improved coverage thanks to a new roaming agreement.
These questions are ones that CEO Rene Olbermann and the rest of the Deutsche Telekom board are going to have to discuss sooner rather than later, as T-Mobile USA is still dangerously close to teetering on the brink of collapse.