T-Mobile is hurting financially. And consumers have few wireless carrier choices. Is there enough wireless competition in the U.S.? Would having greater competition reduce mobile charges and increase services? Some thoughts…
Betanews has an interesting article about T-Mobile USA, its wireless competitors and Deutsche Telekom, TM’s parent corporation in Germany. Did you know that T-Mobile has more cellular towers than other wireless carriers? The company only generated a 10% profit last year, vs. 40% in previous years. And its churn rate–the number of yearly subscribers who cancel–is just below 2%? Most American retailers these days would drool over just 10% gross profit.
For certain, T-Mobile is not Apple, Inc. which just announced a 70% quarterly profit increase, but comparing TM with AP isn’t fair. TM is a wireless service company while Apple is a top technical manufacturer.
Financial Woes Beset T-Mobile
Deutsche Telekom believes leasing some of its towers will generate revenues as it continues losing customers who have jumped to AT&T for the iPhone. Some customers may also switch when Verizon Wireless releases the iphone in February.
Meantime, T-Mobile U.S.A.’s Philipp Humm, charged with turning the company around, plans to sell as many Android phones as donut stores sell chocolate eclairs. He recently proclaimed “‘It’s time to rethink the way we do business,’” one of those CEO proclamations that fade as quickly as Android phone batteries. Time will tell if the company’s HSPA+ “4G” network will keep customers on the network.
Too Few Carriers – Not Enough Competition
How would you like your town dominated by Costco, Target and only one grocery store (say Kroger)? And these were your only choices of food, clothing and bulk crates of your favorite whatever. And each store made you sign a two-year contract to buy $X per month of products? And the nearest town with a mall and more stores was 50 miles away?
Well, that’s the case with wireless carriers in most American cities. Where you shop is limited; you’re restricted to carrier-selected phones and you have to sign a two-year contract with a penalty should you cancel.
If the AT&T acquisition of T-Mobile goes through, regional carriers who depend on the few larger carriers might have to pay higher fees for customers who roam off their networks. This is a big concern in approving the AT&T/T-Mobile deal.
Wireless Carrier Break-Ups
I believe at some point the FCC and Congress will legislate a wireless carrier breakup just as they did with AT&T in 1974. And I bet that some of the new players will be Comcast, possibly Google, Facebook, smart grid operators and a consortium of smaller players such as Clearwire.