German phone giant Deutsche Telekom is looking to jump into the 4G wireless market in the U.S. through partnerships with U.S.-based service providers, according to a report by Bloomberg News.
Bloomberg reported Tuesday that Deutsche Telekom is looking to beef up its presence in the U.S. wireless market by investing in Clearwire, a company that is building a 4G wireless network using a technology called WiMax. Sources also told Bloomberg that Deutsche Telekom is also talking to Metro PCS, which recently acquired spectrum to build its 4G wireless network.
Deutsche Telekom already owns T-Mobile USA, the fourth-largest wireless carrier in the U.S. But the carrier's growth has remained flat for several quarters. And the company hasn't yet announced plans for its next-generation network.
Last week, rumors resurfaced that Deutsche Telekom was looking to buy Sprint Nextel. Sprint is the third-largest wireless operator in the U.S. and has been struggling the last few years to retain customers. The idea behind a potential buyout of Sprint is that it would give Deutsche Telekom more subscribers, which could help it compete more aggressively against the two largest wireless carriers in the U.S., AT&T and Verizon Wireless.
But now it looks like the German telecom giant could be looking for a more cost-effective way to increase its presence in the U.S. market.
Partnerships with Clearwire and MetroPCS would cost the German phone company much less than purchasing Sprint outright, and it would be a lot easier than trying to digest another wireless provider.
Buying Sprint Nextel would likely become an integration nightmare for Deutsche Telekom. Sprint Nextel is already the product of what many consider one of the worst telecom mergers ever. Sprint bought Nextel in 2005 for $35 billion. And for the past four years, the company has struggled to integrate two different wireless networks. Sprint's network operates using a technology called CDMA, while Nextel uses a technology called I-DEN. T-Mobile USA uses GSM, which would introduce a third type of technology into the mix.
But if 4G access is what Deutsche Telekom really wants, then a partnership with Clearwire makes sense. Sprint owns about 51 percent in Clearwire. Last year, the companies created a joint venture combining assets from both companies. Clearwire, which has already begun building its nationwide 4G wireless network, is using 2.5 GHz spectrum that is owned by Sprint.
Clearwire said in August that it would spend between $1.5 billion to $1.9 billion in 2009 to expand its network. Deutsche Telekom could provide more funding for this endeavor in exchange for access to the network, Bloomberg reports.
Clearwire has already made similar deals with other investors. Last year, cable companies Comcast and Time Warner Cable were among investors that provided the company with $3.2 billion in funding. Google and Intel have also invested in Clearwire.
As the Clearwire network comes online, Comcast and Time Warner Cable have each announced they will offer mobile wireless broadband service using the Clearwire network in areas where they offer cable service.
A deal with MetroPCS, which sells prepaid wireless service, could help Deutsche Telekom get access to a 4G wireless network that will use a more widely adopted technology called LTE or Long-Term Evolution. MetroPCS acquired spectrum in the 700 MHz wireless auction, and it has said that it plans to build a 4G network using LTE starting in 2010. Verizon Wireless, the nation's largest mobile operator, which also acquired spectrum in the same 700 MHz auction, is also building a 4G wireless network using LTE.