T-Mobile invests $4.2 billion in 3G

Posted by Mark Raby

Washington, D.C. - T-Mobile has won the federal government auction for additional radio-wave spectrum. T-Mobile's winning bids totaled nearly $4.2 billion and will allow the company to increase its coverage area to Los Angeles, New York, and other major cities as well as other scattered areas throughout the country. Most importantly, T-Mobile now can build a solid 3G network in the U.S.

The auction garnered T-Mobile 1700 MHz and 2100 MHz bands over a total of partially overlapping 120 areas that, summed up, cover more than 474 million people, according to the company. This number includes a substantial part of the population that is counted multiple times; the actual population count covered by the areas is unclear at this time.

Between Q2 2005 and Q2 2006, T-Mobile's covered population grew by six million, from 232 to 238 million. This number could be expected to go up significantly after T-Mobile makes use of new coverage areas. The company will also be able to natively serve several new metro carriers, which the company currently covers only through license contracts with other large carriers.

The main impact of the new licenses is likely to reveal itself in the mid-term, as the frequency band is expected to be especially used for 3G cellular services. Sources indicated that T-Mobile may be beginning to roll out such services as well as more advanced phones as early as next year.

T-Mobile is currently the smallest of the nation's top-4 carriers and the only one that did not go through an acquisition or merger process. As a result, the company has less than half of half the subscriber-base than the next larger carrier. T-Mobile ended the second quarter of this year with 23 million subscribers, while Sprint Nextel reported 51 million, Verizon 54 million and Cingular 57 million. All carriers went through a phase of dramatic growth in the past five years and are now facing a new challenge of an increasingly saturated market that asks for more than low-priced calling plans. T-Mobile's $4.2 billion investment could be a first step towards a new, data-services oriented environment that offers new room for revenue growth.

For T-Mobile customers, the auction result could bring improved coverage and better reception in the near-term. For example, there are numerous ranges that cover states that are considered to be behind the technology curve or that digital roaming for T-Mobile customers. These areas include in Iowa, Kansas, Alaska, and desert-ridden areas in Arizona. It is unclear, when the spectrum will be transferred and how quickly T-Mobile will build out its network. However, according to an article published by the The Washington Post, some spectrum that is currently being used by the government will not be available to the auction winners until as much as 3 or 4 years from now.