Deutsche Telekom still needs to sell T-Mobile — and soon

T-Mobile US has been on a streak. So much so, I wouldn’t be surprised to see John Legere actually streaking in Central Park sooner or later. Hey, it could happen.

But just yesterday, we saw him tweet out another Uncarrier initiative on changing the way monthly data is doled out on family plans. Instead of having a pool of shared data — as is the trend right now — T-Mobile is returning to the old per-line allotment model. And then boosting each data dose to 10GB, standard. It’s the latest in a string of moves to convince customers to port their numbers over to T-Mobile. And it’s been working.

But while T-Mobile is trying to seed more income, parent company Deutsche Telekom has been itchy to offload its American subsidiary to companies like Sprint, Dish Network or (get this) Comcast. Deutsche Telekom AG has been looking to rid itself of its two-thirds stake in T-Mobile US for the past several years.

Why rebel against the rebel?

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Tim Hoettges is the CEO of the Bonn-based conglomerate and while he admires Legere’s gusto, he thinks that “[Legere’s] management style will never be adaptable to Germany.” Or to business in general, as annual multi-billion dollar investments just don’t make sense when your company has yet to make as much money. A couple months ago, Hoettges backed off the “sell” message (mainly by not using the word “sell”) while in a Re/code interview, but he kept the same drum beat in general.

“It is our duty to go on improving the return on T-Mobile US. If we find a partner who will help us to do so, we will obviously consider it,” Hoettges said.

Deutsche Telekom has been struggling to juice up a disadvantaged T-Mobile network for a long time. T-Mobile was the last of the big four to get LTE spectrum in the US in 2013 (for your information, Verizon was first in 2010, followed by AT&T in 2011 and Sprint in 2012).

The first piece of that spectrum wasn’t even self-built: it was acquired from Verizon. From there, T-Mobile merged with MetroPCS and entered into a spectrum-share agreement with AT&T and Verizon. That attempted AT&T buyout back in 2011 that met its regulatory death? AT&T ended up giving spectrum and money to T-Mobile as a breakup fee.

With conventional cell spectrum busily being auctioned off, traded and devoured, T-Mobile is planning to launch LTE on a swath of unlicensed 5 GHz territory. That spectrum is expected to cover large-capacity venues while Big Magenta is working on the higher-potential 700MHz bands it has.

Who gets the LTE?

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So, what has all this meant for T-Mobile’s network? Well, check out OpenSignal’s “The State of LTE” report for this past quarter. Scroll to the US results.

Legere and his team are doing their best in serving customers and “amping” up their payment plans. “Data Strong” they aren’t quite yet. While tests show T-Mobile as the fastest of the big four carriers in a growing number of metro areas, broad land coverage is still wanting. Michael Fisher might have one view of the carrier’s transformation, but here’s another view: my Sprint device had more LTE coverage on my bus ride from New York to Boston while my T-Mobile smartphone had to resort to EDGE data rates at some points.

Now put your pointer to the black, red and gold flag.

Deutsche Telekom’s focusing on upping LTE speeds across Germany to 300Mbps and having them penetrate 95% of the country by 2018. It already leads the competition in speeds and coverage, telekom.de just needs to not be out-priced by them. But the company’s also focusing on some ambitious pan-Europe “commitments,” too. Just take a look at its annual report from 2014. Not much word on the US there. There’s a passing glance at T-Mobile in DT AG’s first quarter results, but any word of profits (to say that there are much of them) have been omitted.

And who gets the money?

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Deutsche Telekom sincerely wants the best for T-Mobile (to provide better returns to the parent company). But it knows it can bag its home continent if it could just divert its US money back the other way. To Hoettges and the shareholders he serves, they’re looking at a lucrative coup. Meanwhile, T-Mobile, which has a growing income base but not enough signal to serve that base, needs to gear up for next year’s auction of the newly-available 600MHz spectrum. The company’s bids for previous spectrum offerings couldn’t compare to the wagers AT&T and Verizon have made and it cannot afford to once again lose out on expanding its coverage domes.

If Deutsche Telekom isn’t willing to put forward the big money it needs to claim 600MHz for T-Mobile US, it’d do better to find another owner to have at its subsidiary. Some entity with purchasing clout to serve 59 million subscribers. And counting.

What do you think? Where does T-Mobile need to go? What does Deutsche Telekom need to do? Tell me below.

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About The Author
Jules Wang
Jules Wang is News Editor for Pocketnow and one of the hosts of the Pocketnow Weekly Podcast. He came onto the team in 2014 as an intern editing and producing videos and the podcast while he was studying journalism at Emerson College. He graduated the year after and entered into his current position at Pocketnow, full-time.