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T-Mobile Endures Upgrade Challenge, Reports Of Possible Sale July 5, 2005

http://informationweek.com/story/showArticle.jhtml?articleID=165600579

T-Mobile is facing the daunting task of moving to 3G technology, a process that some observers say could cost as much as $10 billion.
By W. David Gardner
TechWeb.com



T-Mobile is facing the daunting task of moving to 3G technology, a process that some observers say could cost as much as $10 billion. Meanwhile, the company is battling reports Tuesday that it could go on the auction block.
However, one German press report cited unnamed Deutsche Telekom officials as calling talk of a sale as "purely fictitious." At the same time, the company is currently focused on the difficulties faced by cell phone service providers who must upgrade from the older GSM European standard.

"The operators using the more efficient CDMA technologies have a significant competitive advantage over those operators using the older GSM technology," said Joe Nordgaard, managing director of wireless telephony Spectral Advantage, in an e-mail. "CDMA has clear advantages over GSM (so) you start to understand the dimensions of the problem confronting T-Mobile."

Nordgaard, a CDMA advocate, said Cingular Wireless has a similar problem as it, too, is faced with moving to 3G from an older GSM base. He noted that Verizon Wireless, which uses advanced 1X EV-DO, has already rolled out its 3G service. The remaining large mobile phone service provider -- Sprint -- is also moving to the advanced EV-DO CDMA architecture, but it has several months ahead of it to sort out the multiplicity of spectrum owned by Nextel, the firm it is acquiring.

"Adding to T-Mobile's dilemma is that the European version of CDMA (WCDMA, also called UMTS) requires 10 MHz (2 x 5 MHz) for the initial RF carrier," Nordgaard noted. "In order to deploy this, T-Mobile will either have to carve this spectrum out of its existing holdings, which are already taxed, or purchase additional spectrum at auction."

Nordgaard added that future upgrades of WCDMA -- likely to be deployed by Cingular and T-Mobile -- are more expensive than CDMA2000 1X and could represent very expensive efforts for those companies. The expense of upgrading to new more robust wireless architectures was often mentioned as a key reason for the Nextel-Sprint merger as well as for Cingular-AT&T Wireless merger.

Nordgaard said the wholesale move to new spectrum is likely to dictate the building of more cellular base stations. In a report Monday, In-Stat predicted that the market for macro-cellular base stations will jump from 1.8 million in 2004 to 3.5 million in 2009.

In-Stat analyst Allen Nogee said: "A combination of new technology, base station upgrades, and increases in needed capacity will drive the cellular base station market."

The In-Stat report, which was not related to the T-Mobile sale rumors, also noted that the worldwide number of cell phone subscribers will hit 2.6 billion in 2009, up from 1.6 billion in 2004.

T-Mobile has been enjoying rapid growth in the U.S. in recent months, adding more than 4 million subscribers in 2004 alone. Its total subscriber headcount is more than 18 million, putting T-Mobile in fourth place behind (in order) Cingular, Verizon, and Sprint-Nextel.