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T-Mobile's challenge: Keep focus off buyout

Mark Milian
Visitors test a tablet during the 2011 Mobile World Congress in Barcelona, Spain, on February 17.
Visitors test a tablet during the 2011 Mobile World Congress in Barcelona, Spain, on February 17.
STORY HIGHLIGHTS
  • Opponents to the proposed merger between AT&T and T-Mobile say choices could suffer
  • T-Mobile is tasked with hanging onto subscribers unsettled by what the deal could mean
  • Public comments from AT&T could be making T-Mobile's job more difficult
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Orlando, Florida (CNN) -- Don't expect T-Mobile USA to air a commercial showing its stunning signature lady passionately accepting a marriage proposal from the AT&T guy.

While the commercials painting AT&T Mobility as sloven, sluggish and unreliable will probably vanish, T-Mobile is striving to keep the rest of its operations running smoothly.

If T-Mobile slackens the innovative marketing, aggressive pricing and growing product offering in anticipation of the acquisition, the carrier could quickly bleed customers.

Already, this situation poses a major challenge to keeping subscribers' minds off the possibility that their choice network could one day transition to another -- one that does not carry much favor among consumers, surveys say.

AT&T proposal comes with insults

AT&T's public comments could be making it tougher for T-Mobile to keep its customers at ease.

After months of berating in a recent T-Mobile ad campaign, AT&T is getting its revenge of sorts. Statements from the company and its executives have pointed out the shortcomings of T-Mobile's strategy, disguising them as defense for its purchase to federal regulators and demonstrating how AT&T could help.

AT&T CEO Randall Stephenson said on a call with investors and analysts that T-Mobile lacks a clear path to LTE, the format that many in the industry say offers the truest 4G experience. Verizon Wireless began deploying 4G LTE service in December, and AT&T plans to do so later this year.

"T-Mobile has no spectrum to build out an LTE network," Wayne Watts, an AT&T senior vice president, said on the investors call.

Wireless spectrum is the cellular capacity that can be allocated to broadcasting calls and data. AT&T has said it's running out of spectrum in major cities and says it's a key reason for this acquisition.

Desmond Smith, a T-Mobile senior product manager, refutes Watts's claim.

"T-Mobile is good on spectrum," Smith said in an interview. "We're in good shape."

Another assertion from AT&T is that T-Mobile doesn't have very good phones.

"T-Mobile customers get the best device portfolio" as a result of the merger, said AT&T Mobility CEO Ralph de la Vega on a panel here at the CTIA Wireless conference.

T-Mobile makes up the half of the big four cell carriers that don't offer the iPhone. (However, the carrier did not discourage people who quickly found ways to make that device operate on its network, sans faster 3G data.) It's also lacking much-buzzed-about phones like Motorola's Atrix 4G on AT&T.

But T-Mobile came out with a strong outlook this week, showing four new gadgets. LG showed the G-Slate tablet with 3-D functions and the G2x smartphone; Samsung had a revival of an old favorite in the Sidekick 4G; and Nokia unveiled a new phone.

Nokia's Mark Slater, who oversees the company's dealings with T-Mobile, said he was unfazed by news of the merger. Slater doesn't expect the proceedings will affect their relationship or the sales performance of their new phone unveiled at the conference.

The Nokia Astound phone is the latest device based on Symbian, an aging but affordable smartphone platform that Nokia will replace with Windows Phone when those devices are ready. The Astound will cost $130 with a two-year contract, and the price can be reduced with a $50 mail-in rebate.

Putting customers at ease

The merger news from AT&T -- and the distractions that come with it -- serves as poor timing for gadget makers trying to grab the spotlight at one of the year's biggest mobile-industry conventions.

It's more worrisome for companies, like Nokia, launching important products on T-Mobile because customers may be reticent to renew contracts, said Mark Lowenstein, the managing director for consulting firm Mobile Ecosystem.

Nokia recently cancelled a phone before its release on AT&T for fear that the carrier wouldn't devote enough marketing muscle to the product. The X7 was supposed to be the first Nokia phone launched exclusively with a U.S. carrier in many months, but that honor instead went to T-Mobile.

"T-Mobile has still got to run as a business for the next year," Lowenstein said. "There's no guarantee that this deal is going to happen."

But T-Mobile and several of its partner device makers, including Nokia and Samsung Telecommunications Strategy Chief Omar Khan, all say the plan is to continue with "business as usual."

Despite that commitment, at least two of T-Mobile's top executives cancelled trips to this week's mobile conference because of the merger announcement on Sunday.

T-Mobile spokesman Tom Harlin said the company is planning to train its store salespeople on how to address questions about the merger and how it affects customers.

Still, the price of losing this deal amidst all the distractions could be devastating for T-Mobile and its parent Deustche Telekom. But AT&T has offered to soften the below if regulators spurn the proposal, agreeing to pay $3 billion and cede some of its coveted wireless spectrum to T-Mobile.

[TECH: NEWSPULSE]

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