T-Mobile is under mounting pressure to beef up its struggling network through an acquisition or partnership, amid reports of an increasing exodus of contract-signing customers.
Deutsche Telekom CEO Rene Obermann said part of the reason for its troubles is a lingering reputation for poor coverage, in addition to the lack of an iPhone on its network.
But analysts say the problem is much larger. T-Mobile is running out of wireless spectrum, channels that allow carriers to send high-bandwidth content, such as video, to smartphones. The lack of airwaves could hamper its growth as consumers increasingly adopt smartphones with multimedia capabilities.
The urgency of the spectrum crunch issue may soon force T-Mobile to look for acquisition targets or a partnership, as it seeks to stem the bleeding of its customer base.
In January, Obermann said that it wasn't looking for an acquisition at the moment, but was exploring options for buying more spectrum. The company is basing its strategy for the future on faster 4G service, but it needs extra spectrum to do so.
"We're investigating what potential partnerships there are in the U.S.," he said. "We are working on the solution, and will hopefully have something more concrete in the coming months."
That solution may involve a partnership with Clearwire, which is mostly own by Sprint, another embattled iPhone-less operator. The two are in talks and are reportedly close to a deal, people familiar with the matter said. Still, another option T-Mobile is mulling involves the sale of 9,000 towers to finance acquisitions during the next federal spectrum auction.
For now, Obermann said the company's 54-megahertz of spectrum is enough to meet demand in the medium term, though the "longer-term question exists."
The beleaguered carrier, struggling to compete with high-end devices from AT&T and Verizon, is now focusing on budget Android phones and cheaper data plans to capture the low-tier market.
On Friday, T-Mobile posted a 12.4 percent drop in fourth-quarter profit to $268 million, while its service revenue remained stagnant at $4.7 billion.
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