Who wants T-Mobile UK?
Forget the customers, grab the spectrum and run
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T-Mobile UK will be sold in the next few months, and the markets are salivating at the synergies possible - but it could easily be T-Mobile's network that remains in place when the dust settles.
Any doubts that Deutsche Telecom wants shot of its UK arm, T-Mobile, were firmly put to rest with Vodafone and then Telefonica in the frame to purchase the ailing operator, and analysts leaping into the fray to suggest that the buyer could save millions by shutting down T-Mobile's network. But with the named buyers running on a different frequency, and T-Mobile already sharing a network with 3, it might not provide the result that the markets are expecting.
Telefonica and Vodafone both run 2G, GSM, networks around 900MHz - spectrum that was awarded to them and for which they pay a nominal sum every year. This spectrum will cost a lot more in future as Ofcom changes the rules as part of the Digital Britain initiative. T-Mobile's 2G network, by contrast, runs at 1800MHz using spectrum that was paid for at auction.
These days all GSM handsets happily switch between 900 and 1800MHz networks. But it's not just a simple matter of switching one network off as there will be some legacy equipment that can't make the transition. Vodafone customers already roam onto 1800MHz, as the operator has a small holding in that region. But 900MHz is unknown territory to T-Mobile users.
3G networks should be easier: all UK 3G networks run at around 2.1GHz, so there's plenty of overlap. But T-Mobile UK's 3G network is in the process of being shared with 3, making the two companies interdependent.
Any purchase of T-Mobile would threaten that process, although contracts have already been awarded and around 5000 sites are due to be decommissioned. If 3 bought T-Mobile that would work rather well, but 3 is the only operator which hasn't been named as a potential purchaser - probably as it hasn't got the money.
T-Mobile is being valued between £2.6bn and £3.4bn, which values the 19m customers at something around £150 each. That sounds like a bargain, considering the subsidy that an operator is prepared to offer on handsets. But it's worth remembering that many of those 19 million are pre-pay and small-scale users who probably rate only £50 or so in handset subsidy.
Then there is matter of T-Mobile UK's 1800MHz and 2.1GHz spectrum holdings. The latter would fit particularly well with Vodafone's holding, as the companies own adjacent spectrum. A purchase would give Vodafone two blocks of 25MHz in 2.1GHz, which could prove very useful for deployment of LTE (Long Term Evolution - the next generation of mobile telephony).
One of the great things about LTE is its ability to expand and contract spectrum usage to suit the usage - if few people are about and you want lots of speed than your LTE connection will expand to fill 20MHz of spectrum and offer you speeds topping 100Mb/sec. If you're stuck on the M25 with everyone else trying to call home then your connection slims down to just 1.25MHz of bandwidth to carry your voice.
This means that operators deploying LTE need large blocks of contiguous spectrum. Not only would a Vodafone purchase give the operator a contiguous block of 50MHz at 2.1GHz, but T-Mobile has a pair of 30MHz blocks at 1800MHz; currently fully of 2G users.
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Next page: How much is that spectrum in the window?
COMMENTS
what about
Am I the only one that has thought amounst all this talk of Vodafone and Telefonica purchasing the operator, that there is another player, albeit about a third of the size, Virgin Media.
It's a perfect move for them as the switch over would be virtually seemless, a "simple" case of combining the T-Mobile and Virgin Mobile customers on the network systems, relatively easy as Vigin are currenly an MVNO on the T-Mobile network, T-Mobile already control everything already. I'm sure that this would cost a lot less than having to merge the four networks and two core systems.
And the business potential is fantastic, start offering home broadband and mobile combination packages, perhaps with femotcells designed specifically for the Virgin Media broadband network. They could offer Mobile TV like sky to.
Even better though is the fact that they could hook the cells up to their cable network rather than BT exchanges, I like the idea of fiber to cell.
Vodafone and T-Mobile
For over 10 years I was a loyal customer of Vodafone. And the main reason was that their coverage in remote parts of the UK was exceptional. As a military officer constantly being posted to the corners of the country it was a great system. Then I moved to London and couldn't get signal in my flat and found that T-Mobile was better in the city. If they could synergise the networks to get the best of both extremes it would be fantastic. My suspicion is that they will end up with the worst of both though. Whilst 95% coverage was a big advertising feature in the early days of phones, it is now much more to do with high cost customers who are general business data users in the cities.
@Chris Woods
I feel your pain, I'm in the same boat, my renewal is up next month and I'm trying to get Touch Pro 2 sorted out through a 3rd party on T-Mobile. I don't really want to wait until this purchase sorts itself out before I buy/renew a phone.
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