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Monday, October 9, 2006 - Page updated at 12:00 AM

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We're poised for the future, T-Mobile CEO says

Seattle Times Technology reporter

NEW YORK — After years of watching competitors roll out high-speed wireless data networks, T-Mobile USA announced last week plans to join the fray.

In a news conference here, the Bellevue-based company and its parent, German telecommunications provider Deutsche Telekom, said they plan to complete most of their network by 2008. That would allow T-Mobile subscribers to surf the Web quickly and use other services. The announcement came after T-Mobile USA spent $4.2 billion in a recent spectrum auction to gain rights to enough airwaves to do so.

In an interview conducted in the back seat of a car weaving through lower Manhattan, T-Mobile USA Chief Executive Robert Dotson talked about the impending rollout of so-called 3G services and the new branding campaign the carrier launched early this month.

Q: What is the message that you are trying to get out today? Does it go beyond your plans for 3G?

A: You are hearing multiple messages, one that talks about the T-Mobile brand and another one about the relationship between Deutsche Telekom and T-Mobile, and so I think you have to separate those two.

The clear message today is around the spectrum auction, which is extremely beneficial to T-Mobile and DT. It gave us a lot of headroom for growth well beyond the next four years. I think that uncapping of the growth potential was a big pressure point for T-Mobile.

I think another message is that there's a huge commitment by DT to bring the T-Mobile brand to the U.S. I think it was 2015 when they said they expect 25 percent of the revenues at DT to come from T-Mobile — and that's not wireless revenues, [but] overall revenues. I think that commitment shows that they know it's a big market opportunity to expand in the U.S.If you go beyond that, a lot of what we want to do in the U.S. is the message we are going to take a different brand and position in a different space going forward. It's not going to be a standalone value play. It will go beyond that, and we can have much more value and add the service component we've had internally, and put that externally in the hands of the consumer.

Q: Do you think you were a value play because you didn't have 3G?

A: Not at all. The point I made earlier today is if you put the side-by-side financials of data services, you can't tell a difference in terms of percentage of ARPU [average revenue per user, a key wireless benchmark] that comes out of Verizon and Cingular. If you put them side by side, and ask which one of these three is a 3G provider, you can't tell at all. So I would tell you we haven't lost any ground.

Q: Then why are you changing?

A: I don't think the two are linked together at all; I wouldn't link 3G with the value decision. One is a decision that we are making after being in the market for five years. We've earned the right and when I say that, it means now the customer trusts us as a brand. And when you are the best service brand out there, once that happens and you deliver on the quality of the call, ... it mandates now that the product should command a premium in the marketplace. So I think it's a logical evolution of the service model we've had.

As for 3G, I've never had a customer walk in the door saying I want a bucket of 3G, so what we are trying to do is build smart applications that require high bandwidth and throughput. But the spectrum was not just about 3G for us. If you look, we needed it for core voice. The growth was not going to go on in perpetuity without that spectrum.

Q: Do you have enough if voice and data continue growing?

A: Absolutely. I don't see when you look at the long-term horizon a compelling need to get more spectrum today. You always look at spectrum when it comes up, but as it sits today we are extremely happy with our spectrum position.

Q: How will you turn from a value player to a premium play?

A: I wouldn't call it premium. I would say we are evolving from a standalone value play to a differentiated experience. Most customers don't know the difference between Verizon, Cingular and T-Mobile. This week is important for us, even when you take DT out of the conversation. We launched a true differentiated service.

We've launched an unlimited service [called MyFaves] with five people on any network, and that integration happens on the handset. Those people are staring at me when I open my phone, and, wow, I'm finding that I am calling them more and texting them more. I think what we are trying to say, is that we are playing a role in connecting people.

At the end of the day, I think one of the most overused terms is that we are a "wireless company." Everything is going wireless today, so I would tell you that wireless is not a good definition of what business we are in. If we are in the "mobile communication business," and that's how I define it, when you look at MyFaves, it's putting all those things — calling, texting and picture messaging — together today in a logical way for a user.

Q: Who are your five [on MyFaves]?

A: My wife; my assistant; my daughter, the most talkative of my kids; my builder, who is skull and cross bones because he can be expensive at times; and then home. That's my favorite five.

Q: What's another example of how T-Mobile will turn from a value play into mobile communications company?

A: I view MyFaves as generation one. The next generation is when someone's birthday is 10 days away, we'll put a package on there that says start to think about what to give that person.

We are seeing a lot of that on a desktop today in the Web 2.0 world. Now it can communicate with the handset, too, so it is life management. This is step one in what will be a long history of products based around a consumer, not a network.

Q: Who is T-Mobile's target market?

A: One of the reasons we've been successful in the U.S., is we are willing to say who's not our customer — it's not the corporate business to business user. We have a lot of BlackBerry users, but it's not a primary target for what we do.

We are primarily in the consumer market, we are disproportionately high with youth — and what we call social youth — so products like the Sidekicks have a rabid following.

Q: I couldn't believe that you said more than 30 percent of Web traffic on the Sidekick is to MySpace.com.

A: I know it's a stunning number. I don't know if you could take desktops and have it be any higher.

Q: You weren't able to roll out 3G because you didn't have enough spectrum, but it sounds like there's been an advantage to watching the other players roll out 3G?

A: You have the other players that have rolled it out, but the biggest advantage is having our sister company roll out 3G. T-Mobile Europe rolled out 3G services a long time ago. Then the advantage for us [is] we've let the market develop and evolve. What you've seen is a cost curve for both the infrastructure and the size of deployment, which means lower [capital spending], and the consumer handsets are at lower prices. I think we haven't missed out on much because the timing for the consumer marketplace is in the next couple of years.

Q: Just as you start to roll out 3G, though, your competitors will be rolling out 3.5G with even faster speeds. Are you only rolling out UMTS, or will you go straight to HSDPA?

A: We are going to roll out UMTS, which is HSDPA compatible. We aren't rolling it out in the first round. It doesn't make sense now, given the deployment in the U.S. People haven't been able to take advantage of the throughput speeds today. Its about getting the right applications in the market, not about being competitive needing faster speeds.

Q: It seems with YouTube's popularity and user-generated content, I could see people wanting to upload and download a lot.

A: Absolutely. User-generated content is a sweet spot that carriers need to look at.

Q: Does user generated content go with the "Stick Together" theme [T-Mobile's new advertising tagline]?

A: "Stick Together" applies to all user groups. Who wouldn't raise their hand to say, "Yes, I wish I have better relationships and more frequent relationships with people in my life."

Q: Is there meaning behind dropping Catherine Zeta-Jones as your spokeswoman, by stepping away from the celebrity and going toward regular people?

A: It was really important for us when T-Mobile was a non-entity in the marketplace to have someone as recognizable as Catherine, and not only recognizable but [someone who] embodied our brand — smart, sexy ... someone who had a lot of confidence, energy, and the daring personality. We looked at that and I think she helped shape what T-Mobile is in the marketplace.

When you look at the youth market right now, we would not have gotten there as quickly in that space without her. With the contract [with her] expiring, I think we need to look at it and see where we are headed in the space is very much about you and I, and the relationships we are trying to maintain.

Q: I was blown away about how much we talk on the phone vs. the Europeans.

A: Yes, they speak 3 hours in Europe and 17 hours [a month] in the U.S.

Q: Are they are still using landlines?

A: I don't think they have as much telephony as we do. The economics stunts a little bit of that growth, too.

Q: And you are now pushing for even more on the mobile phone?

A: You know, usage is great. The more people rely on their mobile device, that's a good thing. If the behavior is there, we will try to make the financials work. It's much harder to try to shape behavior, that's why my contention is to not try, but to encourage the behavior that already exists.

Q: You want to take it a step further and get people to drop their landlines in favor of a mobile phone?

A: Land line displacement is the next logical place — the most brain-dead place to go. There's a lot of discussion of what do you do when penetration rates [of cell phones] hit 80 percent. But let's look at the full telephony dollar that's being spent today. If the behavior exists today how can we get it on a mobile device.

Q: One way to get people to drop their landline is to offer better service in the home. T-Mobile's plan for that is to let the phone roam from a cell network to a Wi-Fi network indoors. How are the trials going for that?

A: They are going well, we are planning on a full market trial expansion later this year, where everyone in one particular market will be able to use that integrated product.

Q: Is that in Seattle?

A: I can't comment on where it will be, but that would be a good market. It would be easy to look and see how it progresses.

Q: Do you need a special router for the service?

A: Yes you do. You could use the one you have, but we are asking people to use a dedicated router, so you don't have to punch in codes or security. We aren't going to ask the consumer to do that.

Q: What will the impact be on the Bellevue office with the new spectrum?

A: One is is that you can fully expect the type of growth and progress T-Mobile has made over the last five years to continue. Specifically what it means for Seattle is that we will continue to grow jobs in that marketplace — that will continue to be the central hub for T-Mobile USA.

Q: In all, T-Mobile USA has 30,000 employees with about 2,500 in Bellevue. Do you have any hard predictions on employment growth?

A: Yes I do, but the fair thing to say is that I always want to smartly grow people. What I never want to do is outpace the growth of the employees to the growth of the business. If anything I want to lag it. I never want to have to do layoffs. That's what "Stick Together" means.

We will grow thoughtfully, and we'll make sure that happens slightly behind the pace of what's comfortable. We rely on people to disproportionately contribute to the business. We hire great people who can handle the work load and we'll do that over hiring quantity.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

Copyright © 2006 The Seattle Times Company

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