04:15 PM

T-Mobile Plans Major Cellular Upgrade To 3G

After spending billions to buy additional radio spectrum, the No. 4 cellular carrier plans to revamp its network to better compete with larger rivals

T-Mobile USA paid $4.2 billion for additional radio spectrum in a recent federal auction, and the cellular company plans to spend billions more to upgrade its network to take advantage of the greater bandwidth.

The company says it expects to spend around $2.7 billion on a network upgrade to third-generation, or 3G, cellular technology that can deliver mobile multimedia services, capabilities it lacks but are offered by other carriers.

Time for cell towers to get a makeover.

Time for cell towers to get a makeover
The rollout of the 3G network is scheduled to begin this year, with most of the work completed between 2008 and 2009. Some markets will get new services enabled by the updated network in mid-2007, according to a company statement.

T-Mobile will upgrade to a 3G network similar to the one Cingular Wireless uses. Technology called Universal Mobile Telecommunications System, or UMTS, will let T-Mobile offer fast mobile connections for video, music downloads, and other services, says Roger Entner, an Ovum telecom analyst.

"Once you have UMTS, adding another base band for more frequencies is easy," Entner says. "T-Mobile had to take this step. Otherwise, their global strategy would have been in shambles." The move supports T-Mobile's strategy to hold on to recent U.S. market share gains, he says.

That's good news for ex-customers such as Jack Jia, CEO for search technology company Baynote. He tried T-Mobile's service for three days, couldn't get good enough reception for data services he required, and switched to another carrier. Jia is a tough customer to please. "I had service with Sprint but wanted a BlackBerry," he says. "Sprint didn't support RIM phones at the time, so I had to look for another carrier."

T-Mobile, the U.S. wireless arm of Deutsche Telekom, was the recent top bidder in an FCC auction of new licenses for using the public airwaves for wireless services. T-Mobile's bid accounted for nearly one-third of the $13.9 billion raised when the bidding closed last month.

According to T-Mobile, the spectrum acquisition supports its strategic reorientation, Telekom 2010, announced in September. Since the purchase of T-Mobile in 2001, Deutsche Telekom has expanded its business to 23.3 million customers. T-Mobile is No. 4 among the nationwide carriers in the U.S. market, behind Cingular Wireless, Verizon, and Sprint, Entner says.

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There are about 10 million 3G cellular subscribers out of the 223 million mobile subscribers in the United States, Entner says.

T-Mobile had revenue of 6.7 billion euros, about $8.4 billion, in the first half of 2006, the company says, making up 22% of Deutsche Telekom's overall revenue and 43% of its mobile communications business.

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