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Pirate Capital Draws SEC Focus T-Mobile Readies New Web Phones -- And Hangs Up on a Star Pitchwoman By AMOL SHARMA September 26, 2006; Page B1 T-Mobile USA is expected to launch a host of new services, including a new generation of Internet phones, to attract customers away from both wireless and land-line phone companies -- and it plans to drop its celebrity pitchwoman, Catherine Zeta-Jones. The company plans to release cellphones as early as October that can roam onto wireless Internet connections at home and in T-Mobile's thousands of Wi-Fi hot spots, people familiar with the company's plans say. Other US cellular carriers are considering offering similar products, but T-Mobile is leading the way. And it may become the first US carrier to provide a Vonage-like Internet calling service, these people said. Both services could mean less-expensive monthly phone bills for millions of consumers.
T-Mobile is launching new services and dropping Catherine Zeta-Jones. The new initiatives will be followed by a major rebranding effort. The company has decided to drop Ms Zeta-Jones from its advertising in favor of a more man-on-street approach to marketing, people familiar with the matter say. Ms Zeta-Jones may continue to appear in some ads until her contract expires next year, but eventually she will be phased out. The amount of her contract wasn't available, but it is valued at several million dollars, the people say. These moves come after T-Mobile committed more than $4 billion for new radio frequencies during the Federal Communications Commission's recent spectrum auctions. The new spectrum is expected to be used to build a cellular broadband network that would allow customers to surf the Web on laptops and download cellphone media content such as music and video at fast speeds.
Other companies are interested in blending cellphones with wireless Internet service. Yesterday, France Tlcom SA's mobile unit, Orange, launched a dual-mode phone that first will become available in France and later will be rolled out in other European markets. In the US, Cingular says it expects to begin carrying dual-mode devices next year. Manufacturers are expected to ship more than 300 million dual-mode phones by 2011, according to a recent report by market-research firm ABI Research. Strategy Analytics, a research and consulting firm, estimates a $33 billion market by 2010 for devices that integrate cellular, land-line, and Wi-Fi Internet networks.
Sprint's partnership with the cable broadband providers may give it leverage in providing a high-quality phone signal over the Internet. Eventually, Sprint and other leading carriers could choose to offer Internet-based calling over their cellular networks. But it isn't entirely clear how wireless carriers will manage the transition to less-expensive Internet calling without losing revenue from traditional cellular voice services. One option is to charge consumers for how much data capacity they use, which some carriers already do. In addition to trying to lure customers away from other cellular carriers, T-Mobile is also courting land-line customers aggressively -- a stance it can take because, unlike the other cellular carriers, it isn't affiliated with a land-line phone company in the US Consumers who have resisted giving up their land-line phones because of poor cellphone reception at home might pull the plug if, as promised, the new T-Mobile phones offer good indoor coverage. T-Mobile is the only major carrier that has yet to deploy a wireless network capable of providing high-speed Web connections via cellphones and laptops.
coffee shops to give consumers Internet access for a daily or monthly fee. The new dual-mode phones will take advantage of that existing Wi-Fi network while extending its reach into homes. After having conducted a limited pilot of its new dual-mode phones near Seattle, T-Mobile is planning to launch in a major West Coast market in the fourth quarter, probably Seattle, a person familiar with the company's plans says. To use the new T-Mobile dual-mode phones, consumers will need to buy a Wi-Fi router for their homes and sign up for service plans that could cost a few dollars a month. Eventually, the T-Mobile routers may be designed to include a jack for an ordinary telephone, so that consumers can use their home phones to make Internet calls, people familiar with the company's plans say. T-Mobile consumers won't be charged cellular "minutes" when they make calls over their Wi-Fi connections at home.
As the number of Wi-Fi access points grows -- there are already more than 40,000 hot spots in North America, and some cities are being blanketed with Wi-Fi connections -- those phones will become more useful. But for now, consumers can only use them in limited geographic pockets. The new T-Mobile phones, by contrast, will operate on traditional cellphone networks when they aren't near a hot spot. The transition is supposed to be smooth, so if a user making an Internet call walks out of a Wi-Fi hot spot, there will be a seamless handoff by a cellphone network, and vice versa. There are some small dual-mode players outside the major carriers. ISkoot offers an application for mobile phones that lets customers make Internet calls from anywhere to people on their Skype buddy lists, but the service uses up cellular air minutes in the process.
In addition to its dual-mode venture, T-Mobile has also started trials of a new service plan called "My Favs," which grants customers free unlimited calling to any five of their friends on any carrier, people familiar with the matter say.
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