No iPhone leads 700,000 customers to flee T-Mobile

@CNNMoneyTech February 23, 2012: 11:22 AM ET

NEW YORK (CNNMoney) -- It hurts to be the only national carrier that doesn't sell the iPhone.

T-Mobile lost 706,000 customers under contract during the last three months of 2011, the struggling carrier announced Thursday. It was the only national carrier to lose customers last quarter.

The nation's fourth-largest wireless company had been shedding contracted customers all through 2011, but the departure rate slowed over the course of the year.

Then Sprint (S, Fortune 500) became the third U.S. carrier to sell the iPhone, and Apple (AAPL, Fortune 500) launched the iPhone 4S -- the fastest-selling mobile device in history. Missing out on that giant wave killed any momentum T-Mobile might have had.

"Not carrying the iPhone led to a significant increase in contract deactivations in the fourth quarter of 2011," Philipp Humm, CEO of T-Mobile USA, said in a written statement.

The company has repeatedly said it wants to carry the iPhone and has tried to work with Apple to bring the device to its network. The issue, executives say, has to do with the spectrum band T-Mobile's network operates in. The iPhone's chipset does not support that band.

There's a potential fix: Chipsets that operate on multiple bands are becoming common in smartphones. However, many analysts say that it's not worth putting more expensive chipsets in the iPhone to serve T-Mobile's relatively puny subscriber base. T-Mobile has 25 million customers under contract, compared with the 87 million customers held by Verizon, the nation's biggest wireless carrier.

The iPhone is a nightmare for carriers

Without a clear path to getting the iPhone anytime soon, T-Mobile is instead focusing on catching up to its larger rivals in another area: 4G.

Verizon (VZ, Fortune 500) and AT&T (T, Fortune 500) have made significant progress in rolling out their next-generation network technology, called Long Term Evolution. Sprint plans to do the same beginning next year. But until now, T-Mobile had not announced any plans to launch an LTE network.

Instead, T-Mobile upgraded its 3G network and labeled it "4G."

On Thursday, the company said that it plans to use the $1 billion worth of spectrum and $3 billion in cash it received from AT&T as part of their merger agreement break-up to build an LTE network. The build-out will start in 2013.

It's potentially good news for T-Mobile customers, who would benefit from faster speeds. But the announcement comes with a giant list of caveats.

To build an LTE network, T-Mobile will need to repurpose what little wireless spectrum it has left from 2G services to 4G. That means enough 2G customers will have to upgrade their devices to 3G to give T-Mobile a sufficient swath of freed-up airwaves to launch 4G services.

T-Mobile also said that it will have to go out and purchase more spectrum to build out a "broader, deeper" LTE network.

And here's the ultimate caveat: Though Apple is widely expected to launch an LTE-capable iPhone in 2012, it may still not be compatible with T-Mobile's upgraded network. T-Mobile's LTE network will transmit signal in the same frequency band that its 2G and 3G networks do today -- the same bands that Apple doesn't think are worth its while to support. To top of page

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