T-Mobile falling behind in data race

T-Mobile’s data revenue is growing, but not at the same pace as the big three’s. While Verizon Wireless and AT&T are reporting year-over-year data revenue growth numbers of 43% and 50% respectively, T-Mobile’s data yield increased 28%. As more of the revenue mix switches to data, T-Mobile is being forced to play catch-up, but the operator has two key tools to help it in that race: a new 3G network and a fancy new smartphone, the Android-powered G1.

On its third-quarter earnings call today, Deutsche Telekom reported that T-Mobile US A brought in $850 million from messaging and e-mail plans, Internet access and application and content sales, as well as adding 670,000 mainly prepaid subs. Data now accounts for 16.6% of T-Mobile’s revenue, compared to 25.5% of Verizon Wireless’s revenues and 24.2% of AT&T’s. Sprint will report its third-quarter financials on Friday.

Until it launched its high-speed downlink packet access (HSDPA) network this summer, T-Mobile was relying on GPRS and EDGE for all of its customers’ data needs. In the past, a lack of 3G hasn’t been a hindrance; T-Mobile was able to keep pace with 3G operators for years primarily through low-bandwidth SMS and email, which have always been the primary drivers for data revenue. In their quarterly reports, however, both Verizon and AT&T said the mix of data revenue is starting to shift from pure messaging to Internet-access plans for smartphones and laptop data cards, which need the high capacity of a 3G network. Verizon and AT&T don’t break out numbers for specific data categories, but VZW reported that two thirds of its data revenue growth last quarter came from non-messaging services, and AT&T signed on 2.4 million iPhone subscribers, all of which pay for a mandatory $30-a-month data plan. Meanwhile, T-Mobile acknowledged today that most of its data growth is still coming from messaging.

That VZW and AT&T are clearly outpacing T-Mobile in data revenue points directly to T-Mobile’s lack of 3G, said Bill Ho, wireless services analyst for Current Analysis. But now that T-Mobile has an operational 3G network that will cover 27 major markets by year end, it doesn’t necessarily mean T-Mobile will catch up to its competitors, Ho said.