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How the iPhone Led To the Sale of T-Mobile 276

Hugh Pickens writes "Kevin O'Brien writes that Deutsche Telekom's announcement to sell its American wireless unit, T-Mobile USA, to AT&T for $39 billion ended a decade-long foray into the American market that was undermined, in part, by the advent of the iPhone (reg. may be required). Deutsche Telekom had been generating decent sales from its American operation, but after the iPhone went on sale, sold exclusively at first for AT&T in the United States, T-Mobile USA began to lose its most lucrative customers: those on fixed, monthly plans, who defected to its larger American rivals — AT&T and Verizon Wireless. 'The iPhone effect cannot be underestimated in this decision,' says analyst Theo Kitz. "Without being able to sell the iPhone, T-Mobile was in an unsustainable position and T-Mobile USA became a problem child." Ironically, AT&T's acquisition won't help T-Mobile customers get access to the iPhone anytime soon, as T-Mobile will remain independent, albeit under AT&T's stewardship, for around a year, and won't offer the iPhone to its customers during that period."
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How the iPhone Led To the Sale of T-Mobile

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  • by poetmatt ( 793785 ) on Tuesday March 22, 2011 @08:26AM (#35570798) Journal

    the iphone has zero to do with tmobile being sold, which, in case people haven't noticed, still has to be approved by the government. This deal actually might not be, in which case a lot of people will be happy.

    What a joke of an article. It only looks at customers lost from the iphone, and not customers gained once tmobile picked up the G1, their first android phone. Talk about spin.

    • Its like the article writers are so in bed with apple they just can't write about the iphone enough. Any excuse to extol it's virtues and power is a good one. Never mind the competition because they aren't apple and only apple makes the things we love.
    • by Anonymous Coward

      According to the business sites, AT&T is going after T-Mobile for their spectrum - AT&T is hoping that T-Mobile's spectrum will help them with the connection and quality issues.

      It has nothing to do with the iPhone or the Android.

      • by Sique ( 173459 )

        From AT&T's side, yes. But why should T-Mobile sell it to AT&T in the first place, if it is so wonderful?

        You are only looking at the AT&T side of the deal, while the article was looking at the side of T-Mobile.

    • What a joke of an article. It only looks at customers lost from the iphone, and not customers gained once tmobile picked up the G1, their first android phone. Talk about spin.

      Maybe because the sales of the iPhone are so much larger than the G1. Overall, Android phones outsell iPhone however those sales are spread across different manufacturers and carriers. Until recently iPhone was only on AT&T which was GSM.

    • What a joke of an article. It only looks at customers lost from the iphone, and not customers gained once tmobile picked up the G1, their first android phone. Talk about spin.

      Spin? This is common sense. The G1 sold maybe a million or thereabouts. Meanwhile, AT&T alone sold about 16 million iPhones last year alone.

      On a related note, this is the first time I've felt the need to "hate" the iPhone, as it will directly affect me as a T-Mobile customer.

      • Somewhat ironically, the iPhone got me to switch from ATT to T-Mobile - I had a first gen iPhone on ATT, but the service sucked so abysmally in my area that I jailbroke my phone and used it on T-Mobile, the only other compatible network in my area.

        I'm on Sprint now, however - they made me an offer I couldn't refuse (hi, 4 lines for 4 HTC evos, unlimited everything including data/"4g" for under $180 USD/month!). I wish Sprint and T-Mobile had merged - Sprint's massive bandwidth that often goes unused + T-Mob

      • Are you moronic? If the G1 sold a million (which it has sold far more, but that's besides the point), the question is, what is the ACTUAL loss from iphone versus the gain from the G1?

        If Tmobile lost a million people form the iphone and gained a million from the G1, guess what? The iphone had no significance at all.

        The "16million iphones" doesn't mean all 16 million people are from Tmobile, dumbass.

        • Are you here on a discussion forum to discuss, or just spew? Goodness, manners.

          I never said that T-Mobile "lost" customers. I also never said that the G1 didn't "gain" them customers. But on balance, the G1 sales were - in the US - about 1/16 that of the iPhone. Clearly, the iPhone drew more customers to AT&T than the G1 did to T-Mobile. And it seems reasonable that the iPhone also retained more customers for AT&T than the G1 did for T-Mobile.

    • by Desler ( 1608317 )

      What a joke of an article. It only looks at customers lost from the iphone, and not customers gained once tmobile picked up the G1, their first android phone.

      And how many did they gain from the G1? Do you have any figures or are you just assuming that a bunch of people will just agree with you without asking for evidence? Anyway, it took 6 months for the G1 to even reach 1 million sales for T-Mobile. The original iPhone, on the other hand, had sold 1 million units in 74 days for Apple and AT&T in the US. So sorry, I don't buy your claims of the G1 being some huge customer gainer when it had anemic sales in comparison to the iPhone. But if you have some

    • Actually, I think the deal had to do with the iPhone, just not how the article presented it. When AT&T's infrastructure struggled with the high demand of usage for bandwidth since the release of the iPhone, AT&T had to scale up in a hurry. TMobile has a large 4G infrastructure rolled out already, AT&T is working on it. I think that was probably the most important factor in deciding to purchase them.

    • by yuna49 ( 905461 )

      I would have liked to see comparable data on Verizon and Sprint defections after AT&T released the iPhone. I don't find this argument at all convincing. It sounds more like either a post-hoc rationalization for dumping an unprofitable investment, or a way to convince Telekom investors that their US problems were all Apple/AT&T's fault.

      As an AT&T customer who was recently considering switching to T-Mobile, I'm not very happy about the proposed merger. Now we'll have only one GSM provider in t

    • The G1? Really? (Score:5, Insightful)

      by hellfire ( 86129 ) <`moc.liamg' `ta' `vdalived'> on Tuesday March 22, 2011 @10:13AM (#35572270) Homepage

      Yes, the story is hyperbole and conjecture, because most tech articles online are based on dramatic declarations rather than facts. However, your comment is also a bit hyperbolic.

      Think about business here. The iPhone wasn't the sole reason but it helped a lot. In terms of subscribers and money, the carriers right now are 1) Verizon, 2) AT&T, 3) Sprint 4) T-Mobile. Verizon has differentiated itself by running on it's reputation of reliability. AT&T differentiated itself by getting the iPhone first. It remains to be seen if AT&T can remain #2 but it has done a good job of locking some people into their service by getting a boost from the iPhone. Sprint and T-Mobile are a distant 3 and 4, because they aren't differentiating themselves well, and because AT&T was stealing their high end subscribers while local smaller outfits like MetroPCS, Cricket, Boost, Amped and others were stealing their low end subscribers. So what you end up with is a smaller T-Mobile and a larger AT&T with lots of cash to start making business deals.

      Now ultimately the reason why T-Mobile is being sold is because AT&T bought them. The article makes it seem like AT&T handed T-Mobile a crushing defeat and Deutch Telekom whimpered for mercey and sold their meager T-Mobile branch. Far from the truth. Deutch Telekom saw a money making opportunity, better than what they were making now. There are probably lots of business reasons surrounding it, and DT saw they were getting their asses kicked since 2007. They could continue to operate and try to come up with something new, but quite simply they cashed out when someone made them an attractive offer. DT saw they weren't as competitive as they wanted to be, so they took their money and went home. They might be able to make more money by investing that $39 in their European wireless market... or just invest it in oil futures or something.

      As for the G1... seriously? Don't make me laugh. T-Mobiles subscriber base has shrunk since 2007. Period, regardless of what technology AT&T and T-Mobile are offering. You can hardly say T-Mobile gained as many customers from the G1 as AT&T did from the iPhone.

      • It hardly is attributed to the iphone for that matter, either. What I was trying to point out was, if tmobile is shrinking, there is more to that picture than the iphone, especially considering that android has more marketshare than iphone now anyway.

        • by hellfire ( 86129 )

          Actually you originally said: "the iphone has zero to do with tmobile being sold". Now you are saying: "there is more to that picture than the iPhone." which is it? In fact the latter is my point, not your point.

          And to address your statement: "It hardly is attributed to the iphone for that matter". Actually as I stated it is a large point. The iPhone gave AT&T a large infusion of cash and took away subscribers from T-Mobile, helping to shrinking the T-Mobile user base. One company got bigger, anot

      • Where do you think the 39 billion came from? Trees? iPhone tree people then!

        AT&T definitely wouldn't be so arrogantly entrenched and flushed with money unspent on coverage/towers without the iProducts sheeple/monkeys.

    • by metlin ( 258108 )

      Honestly, I was one of those folks who switched from T-Mobile to AT&T because of the iPhone. Reception in our neighborhood was bad enough, and after waiting for a couple of years (and seeing how my friends using the iPhone with T-mobile had their own set of problems), I decided to switch.

      Ironically, my wife (then girlfriend) also switched from Sprint to AT&T for the same reason.

    • In a presentation to market analysts, ATT said this purchase would increase average revenue per user, decrease churn, and improve margins. In other words, they will take more money from each of us, we will be less likely (able?) to switch to another carrier, and they will see more profit from each of us.

      None of those give any hint of benefit to the customer. If ATT is brazenly presenting these facts to wallstreet in a public fashion prior to the merger, they must feel their lubricating lobbying activities

  • So why couldn't people buy the iPhone unlocked? As I understand it T-Mobile is the only network in the US that doesn't penalise you for using your own phone.

    • Re: (Score:3, Insightful)

      by gabebear ( 251933 )
      T-Mobile uses 1700Mhz 3G and AT&T uses 1900Mhz. 1900Mhz is more of the world standard but other stuff shares this band with 3G in the USA and only AT&T uses it. They both use 850Mhz for voice and Edge.

      So you can use a iPhone on TMobile, but it will only be Edge. Same goes for a lot of phones bought with TMobile when trying to use them with AT&T or outside the US.
    • It's not a matter of locked-vs-unlocked. It's a matter of frequency. Specifically, AT&T uses 850MHz and 1900MHz for UMTS/3G. Most other countries use 1900MHz and 2100MHz for UMTS/3G. T-Mobile's spectrum happens to be 1700MHz and 2100MHz. IPhone can't do 1700MHz, ergo an iPhone -- even unlocked -- on T-Mobile is never going to get better than EDGE.

      It's not a permanent situation. Chipsets supporting T-Mobile's frequencies have been around for at least a few years. The only real question is whether the cro

  • You said no to the iPhone. You and all other US carriers

    AT&T said yes

    So cry me a river...

    • by jo_ham ( 604554 )

      Reminds me of the 6 or 7 publishers who turned down Harry Potter.

      Or the studio that let a young director whose name rhymes with "Greedo Shot First" keep sole merchandising rights on a little space-based movie because they figured it had zero potential.

      • Or the guy who paid full price for a lottery ticket with the wrong numbers on it.

        Hey, I didn't rush out and load up on AT&T stock when they got the iPhone, did you?

        • by jo_ham ( 604554 )

          No, I don't live in the US and have no personal state in the well being of one of its cellular carriers.

  • It would have taken longer for Palm users to switch to iPhones if T Mobile had continued to support them. A lot of Palm users still are on with the $10 data plan, but no help from customer service, you have to work it out yourself. I wonder if I can move my SIM to an iPhone? My Centro is dying.

  • One word - Flexpay (Score:2, Informative)

    by Anonymous Coward
    The main reason of T-Mobile's problems is one product - Flexpay. They went after the "subprime" market, and then they found out later that (Surprise!) they don't pay their bills. And the horrifically buggy implementation of this product has done nothing but hurt T-Mobile. It greatly affects time-to-market for almost all projects, which really hurts the business and causes them to lose postpaid customers.
  • by Voyager529 ( 1363959 ) <voyager529 AT yahoo DOT com> on Tuesday March 22, 2011 @09:04AM (#35571190)

    But it wasn't the whole puzzle. Sure, T-Mobile lost some customers to the iPhone over the years, but so did Verizon. The problem is that they were impacted more because they had a smaller number of customers to begin with.

    T-Mobile had a particular niche that they served better than anyone else - the deaf community. Rag on the Sidekick all you want, but not only did they work better for the deaf community through pervasive TTY services, they had a specific plan for it, too. They just killed that service, effectively making enemies of some of their most fiercely loyal customers. Similarly, T-Mobile was known for not putting pressure on the handset OEMs to provide Android updates; it's among the most common complaints of Samsung owners.

    T-Mobile tried competing with AT&T on the same merits that AT&T used to compete with Verizon. This was foundationally problematic, because they didn't stick to their strengths. "No data overage fees, ever" - that's all they had to say, and they would have had PLENTY of people who have had the pleasure of disputing $300-$800 of data overages. They could have implemented a spending cap to prevent outrageous bills, better advertised their international wi-fi calling, better advertised their bring-your-own-phone programs, and done something like "If you don't love us in 60 days, we'll refund every dime and help you go back to your old service, no questions asked". While I've heard a bad customer service story here and there for T-Mobile, my eight years of being a customer there have been an absolute pleasure. If they advertised that aspect of it, they might have been able to change some minds instead of trying to say "we can do what the iPhone does too"

    It probably wouldn't have hurt to make it known that all the handsets they featured in their commercials run Android, just like the Verizon handsets, because lots of people think Android==Droid==Verizon Exclusive.

    The fine article is correct in saying that T-Mobile couldn't compete with the iPhone at the hip-handset level. It fails to mention that there were plenty of other places where T-Mobile could have competed against AT&T and Verizon and won out, but didn't.

    • sh
    • I find it interesting that market analysts consider _handset exclusivity_ to be a credible reason for a network operator to be an unsustainable business.

      It's further evidence, in my opinion, that handset exclusivity is tremendously damaging to the health of the American mobile data/voice marketplace. In some countries, tying handset availability to specific network service providers is actually illegal under trade practices acts. It's pretty clear that the current toxic American phone marketplace is greatly

    • by JSBiff ( 87824 )

      T-Mobile had, what I thought was, a very innovative feature of their network. They supported a technology called UMA (which T-Mobile marketted under various names; I think most recently as "Unlimited Hotspot Calling").

      The idea was that phones that supported it, could make calls over a Wifi broadband internet connection - it used the same basic digital protocols as the regular GSM network, I believe, but just routed the data over Wifi when available, instead of over the cellular network. If you left the wifi

  • My wife and I payed good money to get out of an AT&T contract several years ago and went over to T-mobile. We can't seem to get away from that company.

    Rate hikes for everyone in 3... 2... 1...

    • by cptdondo ( 59460 )

      Yeah, that worries me. I pay a relatively small amount for 4 phones. Under AT&T's rate plans, I can see my rates go through the roof.

      Also, T-Mobile will unlock your phone on request. Lastly, I really like T-Mobile's customer service. They are polite and professional.

      The only time I had a billing issue they fixed it, no problem. I've been with them 8 years, and I can see that under this deal I am going to get raped.

      I pay $125 a month including all fees. The closest plan I can find with AT&T wil

  • T-Mobile is cheaper than AT&T. If acquisition = cost performance, everyone will pay less than current T-Mobile rates. But we know that will never happen. Macro business is all about leverage. AT&T had enough of it to make the government cave. Next victim is the consumer who has none of it.

    • I have a Nokia N900. Unlocked phone, no rooting needed. I can only get service from one of two providers in my area. T-Mobile or AT&T as the N900 needs a SIM card and Sprint, Verizon and US Cellular do not offer them, only T-Mobile and AT&T. The cost of an unlimited plan from AT&T (voice, text, data) is $120 a month. From T-Moblie it is $70. Which do you think I chose? What choice will I have tomorrow? I am afraid the answer to that is a choice between $120 and $120.
  • "ironically, AT&T's acquisition won't help T-Mobile customers get access to the iPhone anytime soon"

    Anyone who really cared about the IPhone, has long ago defected. Those smartphone users who stayed likely have other priorities (like having an antenna that works?).

    • "Those smartphone users who stayed likely have other priorities (like having an antenna that works?)."

      It was so very hard to make the decision to switch in 2009 knowing that in 2010 Apple would release a phone with a bad antenna.

  • This article makes it seem as if T-Mobile needs to be bought out more than AT&T needs a 4G network. Sprint has had a 4G network for almost a year, Verizon is currently rolling out a great 4G network, and T-Mobile has deployed a great 4G network of their own. Meanwhile, AT&T is caught with their dicks in their hands. Not only have they not rolled out their own 4G network to compete with the current offerings, but they don't appear to have any plans of rolling one out anytime soon. It would probab
  • by slapout ( 93640 ) on Tuesday March 22, 2011 @11:17AM (#35573352)

    I think AT&T was just tired of those commercials pointing out how bad AT&T is. Luke Wilson probably wasn't available to run counter ads, so it was just cheaper to buy them.

  • My first mobile phone was an OKI bag phone ( I was the second most active user in Maine for a while, thanks to the guys at Maine Wireless for all the free minutes), but some time in the 90s I got my first paid-for phone from AT&T WS. I lived through the change to Cingular, then when they went back I bailed to T-Mobile in 2006.

    So now I'm being driven back? Like I'm gonna hook up with VZW? And Sprint, the red-headed stepchild of the industry? No.

    I got nowhere else to go. 2012 will mark my teturn to t

  • Exclusive partnerships, by their very nature, lock out competition and as such are innately anti-competitive.

    Rather than seeing AT&T buy up besieged T-Mo (I use a T-mo prepaid sim in my smart phone, btw. No data plan, I use wifi hotspots for data.) I would rather see handset makers barred from signing exclusive backroom deals-- the whole "Give us $$$, and we'll partner exclusively!" shit has to end.

    If the iPhone had been readily available on multiple carriers from the go, then at least two things would

    • Hindsight is 20/20.

      Remember that it was Cingular that originally had the exclusive iPhone deal, and AT&T bought them out right before the original launch.

      No one else *wanted* to carry the iPhone, least of all Verizon, it took too much control away from the carriers, who were used to nickel and diming for every single handset feature like Bluetooth and custom ringtones. Though restrictive in other ways, the iPhone was instrumental in breaking the carrier's grip on power in the US and paving the way for A

  • Is there no anti-trust regulation left remaining in the the U.S.? Did they throw 'em all out in the trash bin while no one was looking? I am genuinely puzzled.
    • Oh, those guys? AT&T bought them too.
    • Is there no anti-trust regulation left remaining in the the U.S.? Did they throw 'em all out in the trash bin while no one was looking? I am genuinely puzzled.

      Nothing. Antitrust does not imply there must be a specific number of competitors in a market; rather it looks at market power and how company(s) exercise it. At any rate, there is more to he US cellular market than ATT/VZW/SPRINT/TM - with various prepaid and other competitors (MetroPCS for example) that give people a choice. You want unlimited calls/text/web for cheap with no contract - it's available just most people don't consider anyone but the big 4.

  • T-Mobile customer who switched to AT&T when I got my iPhone 4 here...I used the original EDGE iPhone for three years on T-Mobile, never had a dropped call. T-Mobile had much, much better pricing and very good support. This makes me sad. :(
  • I had considered going with T-Mobile. They had plans that I was interested in. But then I did a search using their site for retail locations and found they had no stores in my state, only payment drop boxes. Apparently they only wanted my business if I wasn't from here originally.

    • I had considered going with T-Mobile. They had plans that I was interested in. But then I did a search using their site for retail locations and found they had no stores in my state, only payment drop boxes. Apparently they only wanted my business if I wasn't from here originally.

      I've been a T-Mobile customer for 3-4 years now, and have never been in one of their stores.

  • Maybe it was, specifically, the iPhone, but maybe not. As a long-time T-Mobile customer, my main complaint has always been Tmo's available selection of phones. If I wanted a good phone, I had to buy an unlocked GSM model from outside their usual offering. So, I'm sure the iPhone influenced the situation, but it may have been less the fact that the iPhone was only available on AT&T, and more the fact that it added more contrast between other carriers' good phones and Tmo's selection of crap.

    The Nexus

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