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T-Mobile Suffers in Competitive US Wireless Biz

Deutsche Telekom AG (NYSE: DT) blamed T-Mobile US Inc. 's weak first quarter on the fierce competitive environment in the U.S., which it used as ammo for its sale of the company to AT&T Inc. (NYSE: T). (See Deutsche Telekom Shrinks in Q1 and AT&T to Buy T-Mobile USA for $39B.)

The U.S. carrier division added 372,000 prepaid customers in the first quarter, but that was largely offset by the 99,000 it lost from its contract business. Total churn for the quarter was 3.4 percent, leaving T-Mobile with 33.63 million customers, down from 33.73 million at the end of last year.

DT CFO Timotheus Hoettges and CEO Rene Obermann blamed intense competition for the losses and pointed to Verizon Wireless 's iPhone and first Long Term Evolution (LTE) handsets and falling smartphone and service plan pricing as examples.

Obermann then used the poor quarter results to fuel a discussion about the upside of a T-Mobile-AT&T merger. U.S. consumers in 23 markets can choose from five wireless operators, mobile virtual network operators (MVNOs) and some over-the-top players, he said.

"That competitive intensity will remain very intense in the forthcoming years, so we therefore have no reason to believe that transaction won't get approved," he said on DT's first-quarter earnings call.

The acquisition would give DT an 8 percent equity stake in AT&T, but outside of the clear benefits to the company's own bottom line, Obermann reiterated what he sees as benefits to U.S. consumers. The most important is the faster LTE rollout through a combination of spectrum and networks, to 95 percent of the U.S., he said.

T-Mobile lacks the spectrum to do this on its own, and Obermann said it would have had to use spectrum refarming at a later date to deploy LTE -- a primary reason it's divesting its U.S. business.

The DT CEO believes the deal should close in the first or second quarter of 2012, despite the increased regulatory scrutiny it is attracting. (See AT&T/T-Mobile: Riddled With Regulatory Risk.)

— Sarah Reedy, Senior Reporter, Light Reading Mobile

Yonkydoodle 12/5/2012 | 5:05:49 PM
re: T-Mobile Suffers in Competitive US Wireless Biz

I find the reason for Tmob's losses being ascribed to the competitive nature of the wireless market a little absurd. Isn't this alone a reason why the FCC should allow for the ATTTM merger to procedd? Rather sooner than later. If Sprint, Tracfone, and MPCS can add huge numbers of new prepaid subscribers to their books - doesn't that merely indicate that Tmob, is in fact not competitive at all?

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