Oct. 6 (Bloomberg) — Deutsche Telekom AG, Europe’s biggest phone company, plans to spend 2.1 billion euros ($2.7 billion) to build a high-speed wireless network in the U.S. to expand T- Mobile USA into its largest division.

The three-year investment plan will add to $4.2 billion in spending on mobile-phone licenses T-Mobile won last month, Deutsche Telekom said in a statement today. By adding services such as video and game downloads, T-Mobile, the fourth-largest U.S. cellular-phone company, plans to increase its customer count by at least 50 percent to 35 million by 2015.

The investments would be the biggest by Chief Executive Officer Kai-Uwe Ricke since he took over, and come after sliding revenue from traditional phone services forced Bonn-based Deutsche Telekom to slash its profit targets in August. T-Mobile USA has been adding customers at a slower pace than bigger rivals Cingular Wireless LLC and Verizon Wireless, partly because of its lack of wireless spectrum.

“We are aiming to maximize revenue market share in the U.S. and make T-Mobile USA the largest single company within the group,” Ricke said in a statement handed out before a scheduled press conference in New York today.

Deutsche Telekom bought T-Mobile USA, formerly called VoiceStream Wireless Corp., in 2001 for $35 billion. The unit overtook the German mobile-phone division in 2004 as Deutsche Telekom’s biggest source of wireless revenue.

In the first half of 2006, the U.S. unit accounted for 22 percent of Deutsche Telekom’s sales, up from 16 percent in all of 2004. Deutsche Telekom’s merged broadband and fixed-line phone unit is the largest division, contributing 41 percent of the group’s revenue in the first half.

Network Construction

Network construction in the U.S. will begin this quarter, with most of the work scheduled to be completed in 2007 and 2008. Juan Jimenez, an analyst at Morgan Stanley had estimated the network to cost $2.3 billion over three years.

Deutsche Telekom, which also sells mobile-phone services across Europe, is attracted by the lower wireless penetration rate in the U.S. While everyone in Germany owns a cell phone, only seven out of 10 Americans have a handset.

Recent acquisitions among U.S. mobile-phone companies also helped reduce the number of competitors. Last year’s merger between Sprint Corp. and Nextel Communications Inc. to create Sprint Nextel Corp. cut the number of national wireless carriers to four from five. Cingular, owned by AT&T Inc. and BellSouth Corp., is the biggest U.S. mobile-phone company, followed by Verizon Wireless and Sprint Nextel.

Market Share

In the second quarter, T-Mobile USA added 613,000 customers for a total of 23.3 million. That’s a third of Verizon Wireless’s and less than half of Cingular’s. T-Mobile is the only major U.S. carrier that doesn’t have a so-called third-generation mobile- phone network that allows fast services such as video downloads.

T-Mobile USA’s total customers may reach 35 million to 40 million by 2015, the company said. The profit margin, measured by earnings before interest, tax, depreciation and amortization as a percentage of total revenue, will exceed 35 percent in the “long-term,” T-Mobile USA forecast today. The second-quarter margin on that basis was 28.5 percent.

Total capital spending at T-Mobile USA will reach 5.6 billion euros this year, including the $4.2 billion for mobile- phone licenses. Capital spending will be about 7 billion euros in the three years through 2009.

Services such as Web browsing may help T-Mobile USA increase market share to 13 percent in the next four years from 10.5 percent, Morgan Stanley’s Jimenez estimates.

Competing Investments

Verizon Wireless, the No. 2 U.S. wireless carrier that’s jointly owned by Verizon Communications Inc. and Vodafone Group Plc, spent $2.8 billion for 13 licenses covering regions including the Northeast, the Southeast and the Great Lakes. The spectrum auction held by the Federal Communications Commission ended Sept. 18.

Verizon Wireless Chief Executive Officer Dennis Strigl forecast last month that the company will sustain $1 billion in quarterly revenue from wireless data services such as e-mail and music downloads.

Six years ago, Deutsche Telekom and five other companies bid an average 8.4 billion euros each for high-speed wireless permits in Germany. Only 24 million Germans had a mobile-phone at the time. There were 82 million subscriptions at the end of June, more than the population of Europe’s largest economy.

Sommer Ouster

Since the 2001 purchase of VoiceStream Wireless, Deutsche Telekom’s largest acquisition outside the U.S. was its 1.3 billion-euro purchase of a mobile-phone company in Austria. Ricke’s biggest investment to date was the $2.5 billion purchase of Cingular Wireless’s networks in California and Nevada in 2004.

Ricke’s predecessor, Ron Sommer, was ousted after $60 billion of acquisitions caused ballooning debt and a plunge in the stock. Four years ago, Deutsche Telekom said it may sell the U.S. wireless division. Ricke kept the unit and turned it into the biggest earnings contributor at Deutsche Telekom.

Ricke will hold a press conference to present T-Mobile USA’s strategy at 10:30 a.m. in New York. He will be joined by Chief Financial Officer Karl-Gerhard Eick, T-Mobile International CEO Rene Obermann and Robert Dotson, who heads the U.S. wireless unit.

Source- http://www.bloomberg.com