T-Mobile sues Starbucks over Wi-Fi deal

T-Mobile USA is suing Starbucks, accusing the coffee behemoth of a breach of contract by allowing AT&T to provide customers with free Wi-Fi access in its cafes.

In a complaint filed Thursday in New York State Supreme Court in Manhattan, T-Mobile says Starbucks "secretly" developed a plan with AT&T to provide Wi-Fi at its cafes, despite an exclusive partnership with T-Mobile. T-Mobile, which is seeking unspecified damages, alleges the companies broke an agreement over how Starbucks should transition the service from T-Mobile to AT&T, according to Reuters.

T-Mobile said that, under the agreement, it had the exclusive right to "sell, market, and promote" its services in Starbucks up until the stores were completely transitioned to AT&T's system, according to the lawsuit. T-Mobile says it is currently bearing the brunt of the cost of the service because it is providing the technology and equipment in all but two of Starbucks' U.S. markets--the San Antonio, Texas, and Bakersfield, Calif., markets.

In February, Starbucks ended its seven-year partnership with T-Mobile in favor of an agreement with AT&T. Under the old partnership with T-Mobile, customers would sign up for Wi-Fi for hourly and daily rates.

Under the new partnership, Starbucks in June began offering two hours of free Wi-Fi Internet service via AT&T to customers who purchase a Starbucks Reward Card with a minimum $5 credit on it. To keep the card active, customers must use their Starbucks Card at least once a month. New members of the service also get a voucher for a free drink.

[strategynode]

Starbucks is really hurting. Their revenue has been steadily declining for the last few years. Amongst all of these strategies and marketing techniques the frazzled CEO is attempting, never once did the idea come up of having coffee that, well, actually tastes good come up. Similarly, with this AT&T thing, it's yet another ploy to get folks to come to a dying dinosaur.

[Hobyx]

You know.. on one level I say, "Tough beans T-Mobile, deal with it and move on." because if they're such free-market proponents then they should be expected to compete.

But on another level.. you look at the contract breach and the fairness of recouping installation investment. So there is SOMEthing to their outrage but it seems more like they should seek reparations primarily from AT&T, if anyone. They're already criminals from the wire-tapping issue. It's no surprise they're guilty of swooping now.

It's a tough call because we should really be using nationwide state-sponsored free wi-fi by now - so that any company that won bids for installing and maintaining infrastructure would have already had their costs taken care of.

[subzerohitman721]

All three parties fubar-ed this. Who the hell pays for Wi-Fi service unless its a city wide service? All of Star-Schmucks competitors including Dunn Bros, Dunkin Donuts, and others are offering Free Wi-Fi with a purchase of a drink. Looking across the street at Starbucks, Dunn Bros always has customers while Starbucks looks bare occupied. Its simple for anyone who has a clue. NOBODY PAYS FOR WI-FI AND NOBODY PAYS 4 DOLLARS FOR COFFEE.

Are those guys at Starbucks that clueless? Lower the drink costs, get the free Wi-Fi, add some normal cooked food to your business. Why go to some place that has pre-made, more to the vegan croud food, than regular sandwiches that appeal to the average Joe? If you want true mass market success, you have to cater to the biggest market. Even all those Apple/iPhone users aren't making a dent on Microsoft's business or making an impact on Starbucks bottom line.

[headpigeon]

Being a member of the vegan crowd... I would just like to say that not a single food item that I have ever seen in starbucks is vegan. Unfortunately, they are the only coffee shop I can count on to have soy milk for my coffee.

[peabody3000]

starbucks may not be the best coffee on earth, but to say it just doesnt taste good is kinda silly

[karcheee]

I have never had to pay for internet at a coffee shop. Thats just another reason not to goto Starbucks.

[mhessick]

Hmm.

Take a look at Apple stock $185.64

and take a look at MicroSoft - $27.40

You tell me which company is doing better

[Simul4ti0n]

The price of the stock has little to do with the overall health of the company. Granted it plays a part, but it's not even close to the whole picture.

[Westho]

I would say the Microsoft is doing nearly 92 Billion dollars better, since they have over 10 times as many outstanding shares.

[Ender0]

You clearly have no clue about stocks. Stock prices tell little without other information. Microsoft has a market cap that is almost $100 billion more than Apple's; also, Apple has a higher price to earnings ratio.

[msc1282]

MSFT mkt. cap=256 billion
APPL mkt. cap=164 billion

[OfficialWire]

Apple:
Mkt Cap: 163.66B
Shares: 881.62M
Gross Profit 8.1B
Net Income 3.4B

Microsoft:
Mkt Cap: 256.02B
Shares: 9.31B
Gross Profit 40.4B
Net Income 14.0B

It's not the stock price that matters.

[ferris99]

MSFT has 9.3 billion shares. Apple is less than one billion. If you control for that, Microsoft is at about 288. Please tell me the next time you invest in something so I know to either stay away or short it.

[yeahitsgood]

Apple is a great and well run company. However, Apple will never take majority market share nor anything close to that from Microsoft. This is for the simple fact that to many companies will not take the time, effort, or moeny to integrate the system to an already well developed grid of servers. But more importantly as far as price goes, windows is much cheaper and still manages the job. Until apple lowers the cost of its hardware for the common man you will never see that exponential increase of users. Example: every bargain laptop you see at Walmart and best buy is a windows based PC until Apple can manage the same deals with the hardware suppliers they will never fully dominate.

Much like I said before I envy the company and eagerly await the arrival of the 3G Iphone, I am a manager for AT&T Wireless and plan on buying a 3G IPhone as long as its reasonably priced.

[Tascas.Tascas]

I guess Apple will have a chance to compete or even to win if Jobs sells OSX to PC, running in all PCs like windows with the same price of Windows.

[chicoblaylock]

When WiMax or LTE finally arrives it won't matter. Shame on Starbucks for not offering a WiFi connection for free while we buy $5 coffee & $6 sandwiches. Don't look over your shoulder Starbucks or some small coffee chain will take your business by offering a less capitalistic grab and not even worryingabout giving away WiMax. Starbucks gives it free in Puerto Rico and no time limit and customers stay & buy product or come just to use the connection and buy - why not give free access in the states too ?

[Svengali]

In the past month, I have stopped going to Starbucks altogether. Before that, I went every day for almost 15 years. The issue is not WiFi, the issue is coffee. If I can't get something better than dishwater Pike's Roast, I will go somewhere else where I always have a 3rd choice of dark roast.

Starbucks seems to think that what THEY decide (like one blend of coffee) is true, is true. Unfortunately not. Starbucks seems to have given up coffee for everything else but coffee.

Goodbye Starbucks.

[CA1900]

Guys, a cup of coffee at Starbucks is NOT $4-5 -- Not even half that. An espresso concoction is in that range, but that's a different (and much more labor-intensive) animal than a cup of regular drop coffee, which sells for under $2.

[mikehoy]

Several years ago, I relied on Starbucks/T-Mobile as my virtual office space when traveling. Over time, the T-Mobile service degraded everywhere. ("I don't know what to tell you, dude. The login server is down or something. Has been for days.) I'm happier today with the Sprint broadband dongle... drinking better coffee at Peet's or Seatle's Best... and avoiding the toxic food at Starbucks. Once we have broadband implanted, maybe they can artificially stimulate our brains and we can avoid both the connection issues and the coffee, and work our way out of the neo-fascism gripping the country. But I digress....

[JCPayne]

This article is wrong.... I have a $31 dollar/month Internet plan that gave me **unlimited** Starbucks Wi-Fi not just hourly...... I think mine is grand-fathered because it looks like it is now $39 for unlimited hotspot.

http://www.t-mobile.com/shop/plans/cell-phone-plans-detail.aspx?tp=tb1&rateplan=T-Mobile-Total-Internet

[Thomas, David]

You're kidding right? If you can't find coffee that taste good at Starbucks, then you MUST NOT BE GOING TO Starbucks!

It's simple, since you can choose exactly what you want from a WIDE assortment coffee, the only possible explanation is you don't like the taste of coffee, IF you are going to Starbucks. Otherwise, your statement is so erroneous, as it came across, that it causes any person of reason to bristle, and wonder why you would make such a remark.

It does not have to be Starbucks. If I walk into ANY coffee establishment, that has a large selection to choose from, then blame the establishment because of I can't find something I like, as simple as coffee, then I know the problem lies with me, and I don't like coffee. Given I like espresso, and not coffee per se, I know this to be true.

I you made the statement that you don't like the way the make an "Iced Caramel Macchiato" (and they do make it per your specifications if you request), then your argument has some footing. But saying they can't make coffee that tastes good!? You are a lost cause, a confused soul, and lacking in mental facilities.

[Thomas, David]

However, I do admit that quality control, starting at the corporate level (the VERY top), has gone to hell in a hand-basket. The beans are not as carefully picked, most of the pastries could not win a 2nd grade baking contest versus mud-pies.

The management, that made these changes have f-cked-up Starbucks, but I drink espresso ... when they screw that up, they will have nothing left.

[Svengali]

Just to let everyone know, the bill to provide country-wide wifi has been stopped in the Congress. Apparently, our current government, which seems to be becoming ever-more fascist and totalitarian, has decided that it does not want potential dissenters being able to communicate with each other on a nation-wide basis. Some people used to consider me to be an extreme, right-wing conservative nut-job ... but reality is reality. Google up "Main Core US Government" people, and find out how bad things really are.

[mikekrause]

T-Mobile is just money grubbing. I say get the hell out of the way, and let Starbucks do what their customers want.

See ya later T-Mobile, we won't miss you!

[dugudr]

It looks like Starbuck live almost to the term of the contract. They may have jumpstart the transition a bit early and it looks like Tmobile is trying to squeeze every drop out of the staggering drunken mermaid. I think "almost" of the 7 seven years is good enough. In business, you don't want to appear like a sore loser and a difficult partner.

[Sarcasmatron]

@mhessick While AAPL is doing well, MSFT has done much better. If AAPL had split as many times, or paid a dividend in the last 13 years, things may be different.

[1BobbyR]

Mhessick wrote:

?Hmm. Take a look at Apple stock $185.64 and take a look at MicroSoft - $27.40 You tell me which company is doing better?

Let?s look at this.

Microsoft total number of shares - As of April 21, 2008 there were 9,313,292,833 shares of Microsoft common stock outstanding. ? source: http://www.microsoft.com/msft/FAQ/stock.mspx

Apple total number of shares ? 875,540,274 shares of Common Stock Issued and Outstanding as of November 2, 2007 ? source: http://www.secfilings.com/filings/320193/14467231/0001047469-07-009340/10-K/APPLE-INC-files-SEC-form-10-K-November-15-2007.aspx?rfrurl=%2fcompanies%2f320193%2fApple-Incorporated%2fsecfilings.aspx%3ffid%3d50002
Microsoft - 9,313,292,833 shares x $27.40/share = $255,184,223,624.20

Apple ? 875,540,274 shares x $185.64/share = $162,535,296,465.36

That is a difference of $92,648,927,158.84 to Microsoft?s? favor.

Microsoft stock information:
Share Information


Shares
Outstanding: 9.31B

Market Cap: 256.02B

Cash Flow (per sh): 1.96

Book Value: 4.03


Fundamentals


EPS: 1.72

P/E Ratio: 15.98

Dividend: 0.11

Yield: 1.60



Management Effectiveness


Return on Equity (1 year): 43.70

Return on Assets (1 year): 23.20

Return on Investment (1 year): 43.70

Performance


52wk High
(11/2/2007): 37.50

52wk Low
(3/3/2008): 26.87



Key Financials

Revenue Total Net Income Earnings/Share EBITDA Long Term Debt
2007 $51.12B $14.07B $1.42 $19.96B N/A

2006 $44.28B $12.60B $1.20 $17.38B N/A



Apple Stock Information:
Share Information


Shares
Outstanding: 881.6M

Market Cap: 163.66B

Cash Flow (per sh): 5.38

Book Value: 20.48


Fundamentals


EPS: 4.85

P/E Ratio: 38.28

Dividend: 0.00

Yield: 0.00



Management Effectiveness


Return on Equity (1 year): 24.10

Return on Assets (1 year): 14.30

Return on Investment (1 year): 24.10

Performance


52wk High
(12/27/2007): 202.96

52wk Low
(8/16/2007): 111.62



Key Financials

Revenue Total Net Income Earnings/Share EBITDA Long Term Debt
2007 $24.01B $3.50B $3.93 $4.73B N/A

2006 $19.32B $1.99B $2.27 $2.68B N/A




Microsoft pays dividends on their stock, Apple does not. Microsoft has a Price/Earnings ratio of 15.98 to Apple?s P/E ratio of 38.28.

Now mhessick, why don?t you tell me which company is doing better.

[1BobbyR]

One last thing on Microsoft to Mhessick: If Microsoft only had 875,540,274 shares of stock its share price would be $291.46 to Apple's $185.64.

I will not even get into 9 stock splits that microsoft has had and how that has affected it price.

[1BobbyR]

One last thing on Microsoft to Mhessick: If Microsoft only had 875,540,274 shares of stock its share price would be $291.46 to Apple's $185.64.

I will not even get into 9 stock splits that microsoft has had and how that has affected it price.