Well Connected
Deutsche Telekom AG

This profile is a summary of the activities and interests of T-Mobile USA Inc., a wholly-owned subsidiary of Deutsche Telekom AG.

Deutsche Telekom's U.S. operation, T-Mobile USA Inc., is ranked as the country's fourth-largest wireless carrier, with 21.7 million subscribers and an estimated 10.2 percent of the market. But it has just finished spending money in a Federal Communications Commission spectrum auction as if it plans on being the country's biggest provider of wireless services.

T-Mobile spent nearly $4.2 billion to get 120 licenses for new wireless-service spectrum released by the Federal Communications Commission. That price tag made T-Mobile the highest bidder among the 104 companies that won licenses.

The bulk of that money, $2.9 billion, was spent on 10 regional licenses that effectively cover the entire continental U.S., along with Hawaii and Puerto Rico. The remaining 110 licenses give T-Mobile more specific coverage in various market areas around the country.

T-Mobile's newly acquired spectrum will allow the company to provide a wide array of services. One of its main objectives seems to be erecting its own independent network for wireless broadband access to the Internet.

Currently, T-Mobile subscribers must visit a Wi-Fi "hot spot," established at many Starbucks coffee shops, Borders bookstores, FedEx Kinko's copy outlets and various U.S. airports, to gain Internet access. The newly acquired FCC licenses will allow T-Mobile to fill in those gaps and, potentially, to offer such Voice-over-Internet-Protocol, or VoIP, calling.

The origins of T-Mobile USA can be traced to the mid-1990s, when two cellular firms, General Cellular and Pacific Northwest Cellular, combined as Western Wireless. Both companies were started by wireless pioneer John Stanton, who, early on, worked with Craig McCaw's McCaw Cellular as the company's chief operating officer from 1985 to 1988.

Meanwhile, in Europe, the Federal Republic of Germany had finally converted Deutsche Telekom AG from a state-run monopoly in the 1980s to a private company by 1996. Germany continues to directly own about 15 percent of DT and, through an 80 percent-owned subsidiary, it holds an additional 16.6 percent of DT.

As a private company, Deutsche Telekom was able to form business ventures and make acquisitions to grow into a telecommunications giant in Europe.

Back in the U.S., in 1995, Stanton's Western Wireless had successfully bid in FCC auctions for wireless personal communications services licenses in several markets throughout the West and Northwest. In 1996 Western Wireless completed an initial public offering and two bond offerings, raising $600 million. Later that year the company launched service under the VoiceStream name in the six markets where it held PCS licenses.

In 1998, Western Wireless established an alliance with Hong Kong-based Hutchison Whampoa Ltd., which invested about $325 million in the company.

In May 1999, VoiceStream Wireless was spun off from Western Wireless. The next year, VoiceStream bought two other wireless companies, Omnipoint Communications and Aerial Communications. With those mergers complete, VoiceStream went national, serving such major markets as New York, Philadelphia, Miami, Detroit and Tampa, Fla.

In June 2001, Deutsche Telekom bought VoiceStream in a deal valued at about $30 billion. The company was added to Deutsche Telekom's mobile telecommunications subsidiary, T-Mobile International.

Stanton, who started Western Wireless, maintained his position as chairman and chief executive officer of that company, and also became the chairman and CEO of T-Mobile USA. Stanton gave up the T-Mobile CEO title in March 2003, saying he was toying with a run for political office.

T-Mobile USA's current president and CEO is Robert Dotson, an alumnus of Stanton's Western Wireless venture. In 2005, Stanton sold his Western Wireless company to Alltel Corp., for $4.36 billion in stock and cash, along with the assumption of $2.1 billion in debt. This year, Stanton unveiled a new investment fund, Trilogy Equity Partners, that's designed to invest in Seattle area wireless and telecommunications start-ups.

— Tony Sanders

October 2006

Sources: Company Web site, Fortune Magazine, Hoover's online, Seattle Post-Intelligencer, Seattle Times, Securities and Exchange Commission filings, USA Today, Yahoo! Finance

   Permalink     Print Full Report