T-Mobile: No 3G in US Until 2007

T-Mobile customers eager for high-speed 3G access received some bad news Thursday. At a conference for investors, T-Mobile USA CEO Robert Dotson told the audience that a network based on UMTS is at least two years away if not more.

UMTS, or Universal Mobile Telecommunications System, is a third generation mobile technology that promises data transmission speeds of up to 2 megabits per second.

According to Dotson, the company does not have the necessary spectrum to support such a service. Although the U.S. arm has some 2 billion euros ($2.64b USD) in its budget to spend on new spectrum, Dotson said to the group, "I don't see that happening in the next two years."

A two year wait would put the fourth-largest U.S. wireless carrier behind its bigger rivals. Cingular, through its recent merger with AT&T, already has UMTS in select markets and expects to sell more widespread access sometime next year. CDMA carriers Verizon and Sprint have been offering pseudo-3G services for some time, and expect to upgrade their networks to full 3G over the next year.

This announcement does not mean that T-Mobile USA will stay with GPRS for the foreseeable future. At the conference, Chief Financial Officer Brian Kirkpatrick told reporters that the company will gradually be rolling out EDGE in 2005. EDGE is roughly three times slower than UMTS and is considered the "baby step" between GPRS and UMTS.

Even though some investors may see the most recent revelation from T-Mobile USA as an ominous sign, Jupiter Research senior analyst Joe Wilcox says there's no reason to worry. "Success with younger users, low-cost data plans and many data capable phones give T-Mobile a leading position in SMS, IM and ringtone usage," Wilcox said.

"Jupiter Research sees a direct correlation between the availability of data-capable phones and higher data usage, both factors weighing in for T-Mobile," Wilcox added. "The same correlation doesn't necessarily exist between network data capabilities and data usages."

He explained that unlike elsewhere in the world, the average U.S. consumer has been very slow to adopt wireless data, which may give T-Mobile enough time to play catch up before the issue of high-speed data access becomes a major factor in consumers' purchasing decisions.

Also a positive for investors is the company’s continued optimism on its growth outlook for the upcoming year. When asked if the T-Mobile expects a slowdown in growth, Kirkpatrick replied, "I don't see any slowdown from our point of view."

T-Mobile added some 3.2 million new customers to its subscriber rolls through the first three quarters of 2004, more than any other wireless carrier except Verizon Wireless.