As of late Deutsche Telekom, European parent to the US’s “T-Mobile” cell company, has been feeling out the waters around possibly spinning off it’s stateside arm into a standalone corporation no longer under the operating umbrella of DT.
T-Mobile, the US-branch of DT, is the 4th largest cell carrier in the US, lagging far behind Verizon, AT&T and Sprint in cell service coverage as well as number of subscribers:
- Verizon: ~90 million subscribers
- AT&T: ~80 million subscribers
- Sprint: ~50 million subscribers
- T-Mobile: ~33 million subscribers
2008 and 2009 were hard years for T-Mobile, loosing customers each quarter. While T-Mobile continues to do well with Customer Service ratings, the companies lag-time with rolling out more advanced features like high-speed 3G as well as any significant coverage is years behind the leading 3 cell providers.
T-Mobile established itself in the market, pre-2009, as a low-end provider, never offering the flashiest or “coolest” gadgets right away to get new customers in. Those customers would flock to Verizon and more notable AT&T with the introduction of the iPhone. T-Mobile literally had nothing to fight back with at that time and has cornered itself into a market where it battles for low-end customers from Sprint and Nextel, Tim Gilbert explains:
T-Mobile has struggled to attract high-value smartphone customers who have flocked to Verizon Wireless and AT&T (T), the largest U.S. mobile-phone service providers. Now T-Mobile is left tussling for less-valuable users with Sprint Nextel (S) and MetroPCS (PCS), Gilbert says. “DT should have done this [IPO] two or three years ago,” he says. “But they are now competing on the low end of the customer base.”
In 2009 Google came to the table and offered T-Mobile an olive branch in the form of being Google’s premier Android partner. Get on the band wagon, ride the hype and be front and center with the hottest android devices. In return T-Mobile would have to promise to put some money behind their 3G network.
My expectation is that both Google and T-Mobile saw an opportunity here and both got a lot of good out of this deal.
We saw that 2009 was a reputation-changing year for T-Mobile. They were no longer the stragglers in the group offering 6-month old BlackBerry models, but instead were leading the marketplace with the newest Google and Android had to offer. First with the T-Mobile G1, then the myTouch 3G and most recently the Nexus One.
While T-Mobile saw more lost customers in 2009, even with the fancy new phones, they did see an uptake in data-plans and data-phone usage, helping balance out the loss to their bottom lines.
Where does this leave T-Mobile? It’s hurting a bit, but not crippled and parent company Deutsche Telekom wants to spin off the company on it’s own with it’s own IPO. What about a 2nd option, one where Google steps in and buys the US-counterpart of DT outright.
While this seems like a good idea in theory, I couldn’t imagine Google possibly consuming an entire cell company and providing any level of acceptable service for at least the next 2 years.
More importantly this puts Google in a very odd place. They are the stewards of the Android mobile platform, adopted by the manufacturers of the Open Handset Alliance. Keeping that alliance happy, to some degree, will keep Android a healthy viable platform with a lot of active members. All-for-one and one-for-all… and all that noise.
The Nexus One was a risk on Google’s behalf. Leaving it’s “neutral leader” position and clearly jumping into the competitive mix with the other members of the OHA by shipping a device directly to consumers.
If Google was to one-up that position yet again, purchase T-Mobile and then put itself in the shoes of a carrier — owning the process from devices to cell service — that may create a very different reaction to the OHA from the members.
Given this, we don’t think Google would ever buy T-Mobile outright. Would they purchase a controlling stake in the new company though?
That’s another question.
Google was willing to put $4.6 billion of it’s own money where it’s mouth was for part of the open spectrum when it went up for bid, a controlling portion of a decently sized US cell telco that already provides hotspot access all over the US would not only continue to provide an excellent launch pad for Google premium devices, but conduits into other Google services or advertisements – as we saw with the free WiFi Google gave to airports across the US redirecting to Nexus One ads randomly.
That might make more sense than outright owning their own cell company we think.