Why Apple Should Buy T-Mobile

Dustin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

By now everyone knows that Apple (NASDAQ: AAPL) has gobs and gobs of cash. The $137 billion question is what should they do with it? Also by now everyone has realized that Deutsche Telekom AG’s (NASDAQOTH:DTEGY) T-Mobile USA has a problem keeping the same female in leather for their commercials. It also has a problem competing against Verizon (NYSE: VZ) and AT&T (NYSE: T) but those are less attractive problems.

I know your thinking that I’m about to say that T-Mobile should carry the iPhone. No, Apple should use a small part of their cash hoard and purchase T-Mobile USA. Deutsche Telekom wants to dump T-Mobile USA, which is now worth about 60% of what it was worth when they purchased it. Apple has the cash to expand T-Mobile’s existing network and tap into a very valuable asset that T-Mobile possesses in the wireless industry, excess spectrum. They would also be getting a great deal on a company that needs their product, as it is the only major US carrier without the iPhone. Deutsche Telekom would be getting rid of what they see as a bad investment. This is what they call a win-win situation.

Now the big question is why in the world would Apple want to buy T-Mobile. Let’s take a page out of Warren Buffett’s investing ideology and think about “moats.” According to Buffett, “the wider a business’ moat, the more likely it is to stand the test of time.” I’m not sure Apple could widen their position in the mobile industry more than creating their own network. T-Mobile is the only wireless provider that has room on its existing network for substantial growth, combine that with Apple’s brand name and loyal customer following and you have a widening moat.

What could Apple do with its own wireless network? First, they would be expanding their business portfolio much like Google (NASDAQ: GOOG) has began to do with their high speed fiber optic internet service. However, unlike Google, Apple wouldn’t have the same growing pains from starting from scratch. Second, Apple could tailor a version of their devices to be optimized to their own network. This would allow all of the features on, say the iPhone, to be utilized via wireless connectivity and not need to be connected to Wi-Fi; FaceTime I’m looking at you. Third, having their own network would allow Apple to shape the wireless industry over time to both produce the best devices and provide the best services to consumers.

What will Apple do? I have no idea and I’m not sure they know what to do. This is defiantly an option worth exploring.





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