Roam if You Want To

One of the key drivers behind Deutsche Telekom AG's (NYSE: DT) $31 billion acquisition of VoiceStream Wireless Corp. (now called T-Mobile U.S.A.) was the German operator's desire to become the world's first global GSM operator.

DT's move to rebrand all of its wireless units with the "T-Mobile" name is also a symptom of this obsession with pandemic roaming (see T-Mobile Is Go). However, in the U.S. -- a country where fewer than 1 percent of all cell phone users roam internationally, according to Strategy Analytics Inc. -- just how important is it to have global capabilities?

"Carriers always over-hype the roaming issue," says David Kerr, vice president of the wireless practice at Strategy Analytics. In the mainland U.S., he notes, "only about 6 percent of revenues come from roaming." And that number is falling as carriers build out national footprints.

Now, there are reasons that carriers want to have that 1 percent of American "elite travelers" on their networks. For instance, international business travelers account for the highest average revenue per user (ARPU), says Monica Paolini at Analysys Consulting in San Francisco.

In general, all carriers are trying to be selective about the subscribers who use their services. They want to attract, and then retain, those who generate high amounts of ARPU, while ridding themselves of those whose ARPUs are very small -- usually prepaid subscribers.

However, Kerr reckons that T-Mobile -- the smallest of the three major GSM operators in the U.S. -- still needs to concentrate on building up subscriber volume, not skimming the cream of the crop. "If you don't have a good hearty meal for dinner, it doesn't matter what you have for dessert," he chortles.

In any case, T-Mobile faces stiff competition for the international cream. As Paolini points out, business-oriented operator Nextel Communications Inc. (Nasdaq: NXTL) has a system that allows roaming between GSM networks and its proprietary iDEN networks in the U.S. "They're pretty tough competition," she says.

GSM/TDMA operator AT&T Wireless Services Inc. (NYSE: AWE) clearly has its eyes on that juicy international ARPU as well (see CTIA: Wireless News You Can Use). Back in March the operator said it had signed more than 25 new international roaming agreements.

Network interoperability isn't even an issue for many U.S. business travelers, Kerr notes. Of the 1 percent who roam, most simply rent a GSM handset at the airport, he says. Of course, this means they don't get access to their voicemail or any of their normal data services, but that doesn't seem to matter.

Perhaps this is the flaw in DT's global GSM strategy. The company was taking a European model and hoping to replicate that in the U.S. It is not surprising that DT might want to do that, as 33 percent of European business users surveyed by Strategy Analytics say they frequently roam out of their home market (i.e., country), while only 2 percent of U.S. business users say they get the hell out of Dodge all that often.

— Dan Jones, Senior Editor, Unstrung
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