T-Mobile Shareholders Demand Upswing - InformationWeek
12:04 PM

T-Mobile Shareholders Demand Upswing

Profitability for the wireless carrier will likely come through acquisition or a public offering, but neither path is clear.

T-Mobile USA's top two shareholders want the wireless provider to be on the way to new profitability by the middle of next year -- or else -- according to the latest report of many swirling around the company.

Another option -- a perennial one -- would have T-Mobile's German parent Deutsche Telekom acquire Sprint Nextel, but that deal would be fraught with spectrum compatibility problems. Sprint uses CDMA while T-Mobile is building its network on Advanced Wireless Spectrum (AWS.) More troubling is Nextel's old spectrum, which has had interference conflicts with the public safety spectrum.

There's more: where would Sprint's WiMax drive fit in an acquisition?

TheFinancial Times reported Tuesday that the German government, which owns 32% of Deutsche Telekom and 5%-owner Blackstone private equity group are pressuring the telecommunications giant to turn around T-Mobile USA by mid-year 2010. Earlier, the UK's Sunday Telegraph reported that Deutsche Telekom had hired banking advisors to explore purchasing Sprint, the third largest US wireless provider. T-Mobile USA is the fourth largest.

Sprint recently said it is moving to raise $500 million in a public offering, but it will need more than that to adequately fund its moves to 3G and 4G networks as well as to help finance its WiMax partnership with Clearwire. Sprint has a market cap of $12 billion, but a net debt of more than $16 billion, according to recent figures

While the major US wireless service providers -- including Verizon Wireless and AT&T -- are flooding the market with advanced phones and new pre-paid plans, the issue of spectrum now becomes the paramount differentiator. Exactly how it all will shake out is still murky. LTE is looked at as an eventual goal for most providers, but that won't be in place widely for years.

"There is a debate about whether T-Mobile USA has a temporary problem -- global recession -- or a strategic one: that it is simply too small to achieve the necessary economies of scale to be profitable," the Financial Times stated, citing a source it said was familiar with the thinking of Deutsche Telekom's shareholders.

Get all the data from this year's InformationWeek 500 survey free for a limited time. Our report examines business and technology best practices as well as IT investment trends among the nation's most innovative IT users. It also provides industry comparisons against which you can benchmark your company's strategies. Download the report here (registration required).

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
How Enterprises Are Attacking the IT Security Enterprise
How Enterprises Are Attacking the IT Security Enterprise
To learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Register for InformationWeek Newsletters
White Papers
Current Issue
Digital Transformation Myths & Truths
Transformation is on every IT organization's to-do list, but effectively transforming IT means a major shift in technology as well as business models and culture. In this IT Trend Report, we examine some of the misconceptions of digital transformation and look at steps you can take to succeed technically and culturally.
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll