T-Mobile on the Rebound

Deutsche Telekom now faces the same problems as before. T-Mobile USA has suffered from years of underinvestment: It is subscale, has fewer high-value contract customers than peers, and has shed subscribers in two of the last three quarters. While the AT&T spoils will be enough to tide it over for a year or so, it faces a bill of up to $10 billion in coming years to build a new high-speed wireless network.

That's a problem because Deutsche Telekom also could require up to $8 billion, almost equal to its annual free cash flows, to cover fiber investment in its home market. Meanwhile, finding another partner for T-Mobile USA looks trickier than it was a year ago. Competitor Verizon Wireless has been swapping and purchasing spectrum from cable operators like Leap Wireless International that T-Mobile USA might itself have turned to. Deutsche Telekom's big hope prior to the AT&T deal was a merger with the third-largest U.S. company, Sprint Nextel. But regulatory risks to that, too, may have arisen. Some form of network sharing might be easier, but that still leaves T-Mobile USA needing significant investment to turn the business around.