RealTime IT News

VoiceStream Invests $300 Million in Upgrades

Officials at wireless digital phone company VoiceStream Wireless announced Wednesday their decision to beef up its 3G network with a $300 million equipment upgrade courtesy of Nortel Networks.

Four cities have been earmarked for the wireless network upgrade: Cincinnati and Dayton, OH; and Buffalo and Rochester, NY. Officials expect the upgrade to finish sometime in the first quarter next year.

The upgrade to its global system for mobile communications (GSM) platform will allow for new applications like international roaming, instant messaging and enhanced chat capabilities, while at the same time put more customers per channel on the wireless spectrum.

VoiceStream, which was bought out by German telco giant Deutche Telecom in May, is looking to expand its services while reducing costs to compete with its primary 3G U.S. competitors. With approximately 4,770,000 digital phone users nationwide, the company lags far behind Cingular Wireless, with 21.2 million customers and Verizon Wireless, with 28 million mobile handset users.

Bob Stapleton, VoiceStream Wireless president and chief operating officer, said that in the coming years quality of service will differentiate the best wireless phone providers.

"Nortel Networks strategy for GSM network evolution focuses on quality and reliability of solutions and services, and will position VoiceStream Wireless to efficiently expand our network and manage the capacity needs of our growing customer base," Stapleton said. "These are key factors in bringing next-generation wireless Internet services to market."

What gave Nortel the edge in its $300 million contract win was its groundbreaking tests in adaptive multi-rate vocoder using VoiceStream's existing GSM platform. The technolgy, VoiceStream officials say, will both improve the voice quality and allow more people to share the same wireless spectrum.

Allowing more customers onto the network while improving quality of service makes Nortel's selection a no-brainer, according to Peter MacKinnon, Nortel Network's wireless Internet solutions senior vice president.

"Nortel Networks is breaking new ground with leading edge Wireless Internet, IP and optical technology, and providing our customers with solutions that can help drive profits and next generation service delivery," MacKinnon said. "These solutions can not only help VoiceStream Wireless gain and keep new subscribers, but also help maximize profitability per subscriber."

Another factor in VoiceStream's decision to pick Nortel is their longstanding business relationship, which started back in 1995, when the wireless company first opened its doors. Service, however, didn't start until 1996.

VoiceStream has been steadily growing since that time, merging or outright acquiring competitors throughout the country. But it's recent assimilation into Deutche Telekom's wirless holding company, T-Mobile, was the result of that same quick growth in five year's time.

The company had been fighting a mostly losing battle before the German telco took over operations. Wireless spectrum auctions and the cost of building out a nationwide wireless network had stretched the company almost to its breaking point, financially.

By the end of June 2001, VoiceStream was $4 billion into its $4.75 billion credit cap, $2.65 billion of which was outstanding. A $5 billion sale of preferred stock to Deutche Telekom the previous year was used to pay off the worst of those outstanding debts, but most ($3.9 billion) went towards network buildout and spectrum auction bids.

It's latest financial statement has intimated that further funding by Deutche Telekom is necessary to continue funding its existing operations.

The company has been in an upswing in recent months, however. A popular marketing campaign, spearheaded by TV commercials featuring actress Jamie Lee Curtis, has increased customer acquisition across the board, nearly 900,000 customes since the end of Dec. 31, 2000.