Ina Fried

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Two Networks, One Company: T-Mobile Explains Why Its MetroPCS Deal Can Work

When T-Mobile announced its deal this week to acquire MetroPCS, one of the first concerns raised by outsiders was the fact that today the two companies use a different type of network technology.

T-Mobile’s network has evolved from the type of system used by AT&T while MetroPCS has historically relied on a CDMA network similar to those used by Verizon and Sprint.

That has some analysts and investors worried that the combined company could face the kind of hurdles that Sprint saw in the wake of its Nextel deal — a combination that, years later, still forces the company to operate two incompatible networks.

But T-Mobile CTO Neville Ray says the key is that both companies have been moving toward a similar next-generation LTE network. Indeed, Ray says the combined spectrum will allow the company to offer a much stronger network in key cities than the two carriers ever could have done solo.

The key, he said, is that T-Mobile plans to quickly migrate MetroPCS customers to phones that use T-Mobile’s network.

“This isn’t about integrating these two networks,” he said in an interview Friday. “It’s about moving MetroPCS over to a bigger and stronger converged network.”

With Nextel, Sprint acquired a set of customers dependent on features that it couldn’t match on its own network. But Ray says there is no feature MetroPCS customers are used to that T-Mobile can’t immediately match on its own network.

From the day the merger takes effect, T-Mobile plans to start selling phones that use the MetroPCS brand but run on its network technology, with a goal to fully migrate users to its network within a couple of years, eventually decommissioning the CDMA network to free up more spectrum for LTE.

Ray said the hardest part will be moving MetroPCS customers over to T-Mobile’s network as quickly as possible.

The technology pieces are relatively straightforward here,” Ray said. “I don’t see any big technology barriers we need to knock down.”

That said, T-Mobile is already involved in a pretty big technological undertaking as it looks to turn on its LTE network by the second half of next year. It’s part of a $4 billion network modernization effort that it kicked off this year after its failed bid to sell itself to AT&T.

MetroPCS is actually somewhat ahead on this front, having already launched LTE along with a number of low-cost LTE devices. The company is also ahead of some major carriers in testing delivering voice in addition to data over the newer network.

T-Mobile, meanwhile is the last of the four major carriers to move to LTE, following Verizon, AT&T and Sprint, which is just now expanding its LTE network.

Even before it has LTE, T-Mobile is working to offer up more iPhone-compatible HSPA+ service in hopes of attracting existing iPhone owners to bring their device onto its network. Currently T-Mobile USA doesn’t sell an iPhone and yet has 1 million or so customers, even though they are limited to very slow 2G data speeds.

“There’s a lot of work ahead,” Ray agreed, but said much of it has more to do with logistics and execution than major technology risk.


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