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.

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