M2M Impact:T-Mobile/MetroPCS News

10/4/2012

T-Mobile USA and MetroPCS are joining forces. Driven by the need for additional spectrum, and the race to better service customers when it comes to data, wireless carriers are in a constant spot of jockeying for position. Within the past 12-18 months we have experienced mergers falling through, “preferred M2M partners” emerge, and sunset plans for legacy networks announced, among other big news.

This week came news of a proposed deal that would merge T-Mobile USA, www.t-mobile.com, with MetroPCS, www.metropcs.com, according to the parent companies of each, Deutsche Telekom, www.telekom.com, and MetroPCS Communications, respectively. Under the new deal the companies would create a company that would keep the T-Mobile name, and become what it calls a “value carrier” focused on competing on value.

Initial news of the deal had many buzzing about what this would mean for the overall wireless carrier landscape, including the fact that combining T-Mobile and MetroPCS spectrum would provide greater network coverage, deeper LTE network deployment, and a path toward 4G. In addition, existing MetroPCS customers will be migrated to a common LTE-based network as they upgrade their handsets as the larger company, catering to the growing no-contract market, would be able to sell more attractive handsets and applications.

The initial announcement paid little attention to how this might impact the market for M2M (machine-to-machine), except for the fact the companies say they will use its “stronger network to advance its B2B offerings and MVNO platform.” But it stands to reason that given the fact it is all about the data these days, that M2M is on the minds of all involved.
 
T-Mobile USA has elected to work in the M2M market in a primarily wholesale model, through partners such as RACO Wireless, www.racowireless.com, and even Wyless, www.wyless.com. Part of the strength for T-Mobile, through such partners, is its continued commitment to upholding its 2G network for the long-term with no indication it will be shutting down such network. This comes at a time when rival carriers like AT&T, www.att.com, announce plans to fully discontinue service on 2G networks by approximately Jan. 1, 2017. Sprint, www.sprint.com, announced earlier this year it expects to cease operations on its 2G iDEN Nextel National Network as early as June 30, 2013. In addition, Rogers Communications, www.rogers.com, says it it plans to support 2G through 2018.

News of the proposed merger with MetroPCS can only strengthen that position, as T-Mobile, rather than possibly being forced to reform some of that 2G network to accommodate the growing demand for 4G, could instead allocate resources to strengthen its 2G network to the fullest.


John Horn, president, RACO Wireless, believes this to be the case, and considers this proposed deal to be, “nothing but a win” citing the fact this adds a whole new level of spectrum efficiency for T-Mobile. In fact, he believes this news represents a strong message by T-Mobile parent Deutsche Telekom, answering critics and showing a strong commitment to the U.S., market via T-Mobile USA.

Sam Lucero, senior principal analyst, IHS Research, does not dispute the point that this could help T-Mobile maintain stronger relationships in M2M via 2G, but adds, “… The MetroPCS home coverage area (including the ability to offer data) is quite limited to major metropolitan areas. So while there would be additional spectrum and coverage, the potential ability of T-Mobile to enhance its geographic footprint in offering data services via the acquisition of MetroPCS’s network is very limited.”

Overall, he is of the opinion that a T-Mobile acquisition of MetroPCS, if approved, would not change the competitive landscape for M2M connectivity services in North America in any fundamental way.  He says, “There would be operational cost savings derived from combining the two companies, and in a general sense that will help strengthen T-Mobile USA, including in its efforts to provide network connectivity for M2M applications.  But this has to be balanced out against the challenge and distraction of merging the two organizations, and two networks (which will be even more difficult given the GSM/CDMA dichotomy between the T-Mobile USA and MetroPCS networks).”

In terms of fundamental assets, he says T-Mobile would still be only the number-four carrier in the U.S. by number of subscribers, which includes voice and data. It must be noted, however, according to the Connected World whitepaper, ‘The Coming Age of M2M and Connected Devices’ that T-Mobile had been considered number-three among the big four in the U.S., in terms of M2M connections, ahead of Sprint. But one does start to wonder just how much this positioning could change given the recent announcements by Sprint around M2M with customers such as Chrylser and its Uconnect access in-vehicle communications system.
 
Matt Hatton, director, Machina Research, www.machinaresearch.com, says the proposed merger could ultimately leave the market with what he is calling a bigger, stronger T-Mobile. He elaborates, saying, “The ideal scenario for T-Mobile would have been a merger with another 3GPP player, which would have given it a further boost in differentiating from AT&T’s sunsetting 2G network. 2G is fine for much M2M and AT&T’s decision to switch off GSM in 2017 would have left T-Mobile as the sole major GSM/GPRS/EDGE operator in the U.S. A robust set of roadmap guarantees around continued support for 2G can help T-Mobile differentiate. A bigger T-Mobile with those guarantees and a reduced requirement for national roaming (and thus dependence on other operators’ roadmaps) would have been a better outcome.”

Hatton believes the benefits of scale across such a CDMA/GSM marriage are all about LTE, but points out the fact that for the most part traditional M2M applications do not rely on LTE. In that case, he is of the opinion that as far as what he calls “the nitty-gritty of delivering M2M” is concerned, the announcement won’t have significant impact.

He adds, “No-one has really had serious cause to deploy multimode GPRS/CDMA devices (although Sprint and Orange started flirting with the idea this year) and I don’t anticipate a big rush to do so from the new T-Mobile/PCSMetro entity.”

However, reiterating Horn’s comments about this announcement representing a strong message to the U.S. market by Deutsche Telekom, Hatton says a bigger stronger T-Mobile USA does mean that the company is likely to be around for a long time and that the German parent company is not looking for a quick exit.

“That being the case, the deal has the potential to reinvigorate the wider group’s pursuit of the M2M opportunity in the U.S., which has been largely on hold (or farmed out to RACO Wireless) since the AT&T merger was announced,” adds Hatton. “It also spurs the DT M2M team on to taking advantage of the asset that it has in its North American operation. Other than Vodafone/Verizon there are no other groups that span the two regions. Between them Europe and North America account for more than 55% of the global opportunity for M2M. The ability to address both markets is critical. It is this potential in Deutsche Telekom, through the T-Mobile USA ownership, that is the reason why DT ranks number-two in our M2M Leaderboard.”

Only time will tell what this proposed deal could mean for M2M. In the near-term, however, it marks another interesting twist in the carrier landscape.





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