T-Mobile Needs the iPhone

When you’re No. 4 in a two-horse race, you not only try harder, but you wonder if the effort is worth it. That’s the position that wireless carrier T-Mobile USA finds itself in. T-Mobile, owned by Deutsche Telekom (OTC: DTEGY ), reported earnings of $320 million for its third quarter of 2010, down from $404 million in the second quarter and $417 million in the same period a year ago. T-Mobile also claims 33.8 million customers, up 200,000 sequentially and 400,000 year-over-year. T-Mobile ranks fourth among U.S. wireless carriers, behind AT&T (NYSE: T ), Verizon Wireless, a joint venture between Verizon Communications  (NYSE: VZ ) and Vodafone (NASDAQ: VOD ), and Sprint Nextel   (NYSE: S). AT&T and Verizon Wireless claim about 93 million subscribers each, and Sprint claims 48.8 million. T-Mobile’s CEO pretty clearly stated the problem as the inability to offer the iPhone from Apple (NASDAQ: AAPL ). He told The Wall Street Journal that “consumers like T-Mobile but they also want to have the iPhone,” and then he noted that the company has “no chance of getting (iPhones) in the near term.” Deutsche Telekom had an exclusive deal to sell the iPhone in Germany until recently. But the missing iPhone is not the wireless carrier’s whole problem. T-Mobile’s revenue fell from $5.38 billion in the third quarter of 2009 to $5.35 billion in 2010′s third quarter, with all the loss coming in service revenue. The company is also paying more to keep existing customers and lure new ones. T-Mobile spent $87 per customer to keep existing customers in the third quarter, and $134 to attract new ones. A year ago those costs were $58 and $116. And those costs are mostly attracting prepaid customers (those who don’t buy contracts), not the more lucrative postpaid customers.  T-Mobile’s blended churn rate for all its customers has grown from 3.2% at the end of 2009 to 3.4% at the end of the third quarter. The churn rate for contract customers in the same period grew from 2.3% to 2.4%.  The company plans to offer its 4G network in the 100 U.S. cities with about two-thirds of the country’s population by the end of 2010. But if the problem is lack of the iPhone, T-Mobile can’t solve that by building a 4G network.
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