By Scott Moritz

Android lands at T-Mobile Tuesday, and as part of the effort to deliver the Google phone to the mobile market, T-Mobile is considering including free e-mail access.

The new Android-powered phone will have Google’s (GOOG) Gmail service built in, and T-Mobile executives are considering offering access to Gmail free, without the need for a data plan, says one person close to the discussions.

The HTC-manufactured T-Mobile phone will be the first of the hotly-anticipated Android-operated handsets, and one of several new challengers to Apple’s (AAPL) iPhone. The Android project was created by Google to cultivate an open application platform to operate next-generation mobile phones.  T-Mobile  – a unit of Deutshe Telekom (DT) - is expected to unveil the phone during a press conference at 10:30 ET Tuesday, and offer it for sale later this fall.

Analysts see the Google phone as the beginning of an important lead in mobile Internet advertising through ads appearing on Android powered phones. Sandeep Aggarwal, an analyst with Collins Stewart, estimates that the phone will generate $5 billion in incremental revenue for Google by 2011.

Should T-Mobile decide to offer free Gmail access, it would be seen as a big counter move to Research in Motion’s (RIMM) BlackBerry e-mail service, which costs $15 a month extra. And if telcos embrace Google’s ad-supported free e-mail, it could help drive Google’s ultimate aim to spread its successful desktop advertising business to mobile phones.

The move to provide free Gmail has risks, however.

T-Mobile could undercut its own data revenue stream from BlackBerry subscribers if users trade in their Curves and Pearls for the Android phone. But T-Mobile, the No.4 wireless shop, needs an attention-getting strategy like free e-mail to help set itself apart from bigger players like AT&T (T), Verizon (VZ) and Sprint (S).  

Google referred calls for comment to T-Mobile and a T-Mobile representative could not provide an immediate comment.

As for the HTC Android phone itself, one user who got an early trial described the slide out keyboard as a little awkward for some typing tasks. The browsing quality however was “better than BlackBerry and close to the iPhone.”

By Michal Lev-Ram

SAN FRANCISCO – CEOs from Sprint, T-Mobile and Verizon Wireless extolled the virtues of open networks -  as long as those networks don’t get too open – Wednesday at the CTIA wireless conference in San Francisco.

The executives took the stage to discuss “openness” -  letting consumers use any mobile device or application over any cellular network. Wireless carriers have traditionally served as gatekeepers to their networks, deciding which applications and even which websites their subscribers  can access.

But that’s all changing. Well, sort of.

T-Mobile (DT) CEO Robert Dotson  told the audience that while the so-called “walled garden” is a thing of the past, carriers need to retain some control to ensure “security and privacy” and provide a reliable experience for consumers.

“There needs to be some stewardship and control,” said Dotson, who argued that a mobile operator can’t guarantee services like voicemail and multimedia messaging will work smoothly when consumers use a phone that’s not optimized for their network.

Sprint (S) CEO Dan Hesse said that in March his company began allowing full Internet browsing, meaning that Sprint subscribers can now look up any website on their mobile browser, even those that aren’t “optimized” for mobile use.

Verizon (VZ) CEO Lowell McAdam also plugged his company’s commitment to openness by pulling out of his pocket two non-Verizon devices (a $69 phone from prepaid service provider AirVoice and a wireless router for the insurance industry) that are currently running on the company’s network. Verizon recently opened its network to outside handsets that meet its minimum testing standards.

Despite vowing their allegiance to openness, all three CEOs echoed claims that truly opening up their networks wouldn’t be all that beneficial to consumers.

McAdam, for example, argued that separating phones from service plans would mean people will have to pay more for cell phones that are now heavily subsidized by carriers in exchange for two-year service contracts.

What’s more, said McAdam, people are accustomed to being able to walk into their carrier’s stores when they have problems with their device. With a more open system, the carrier wouldn’t be involved with the sale of all devices running on their networks, and thus wouldn’t be too keen on helping customers resolve hardware or software issues created by other companies.

“When an application crashes on a Dell laptop you don’t call your cable provider,” said McAdam.

By Michal Lev-Ram

Ever since Sprint acquired Nextel in 2005, the company has become the poster child for poor customer service. It has repeatedly received the worst marks of all five major U.S. mobile operators in a semi-annual customer care survey by J.D. Power & Associates, and has been bleeding subscribers by the millions for the past few quarters. Sprint’s (S) new management has said that fixing its customer service problem is the number one priority for the company. To that end, it’s enlisted chief service officer Bob Johnson to make some sweeping changes to the way Sprint runs its call centers, handles account setup for new subscribers and charges for its monthly plans.

Fortune spoke to Johnson, who took on the job last October, to find out how Sprint is trying to change its ways – and its reputation.

How big of a priority is fixing your customer service problem?

Dan [Hesse, Sprint's CEO] has made it clear that this is the number one priority. This issue has tentacles to so many other aspects of our performance. This is why I have been given the honor of starting each weekly operations meeting. And we are now working together cross-functionally to address all of the “pain points” in the customer experience.

What is the number one reason customers call in and why is it so difficult to help them?

The highest volume of calls is for billing errors – these are typically generated through the account setup process. But there are really two problems here. The first is what we call the “upstream problem.” This is the reason customers call in the first place. Then there is the “downstream” problem – this is what happens after a customer actually gets on the phone with one of our representatives. We used to pay our agents based on average handle time. And if you think about it, if you have an incentive to have quicker calls, you will try to get off the phone as fast as possible, and you won’t necessarily solve the problem the customer is having. So it used to take an average of four to six calls to get a billing problem solved.

So how is Sprint addressing this issue?

In February we started using a new metric called “first call resolution” instead of handle time as a way of measuring a representative’s success. This means that whenever possible we address the problem completely on that first call. We don’t want that call to have to go from one center to another.

What are you doing on the “upstream” side — to make sure that subscribers have fewer reasons to call in the first place?

Many people call in with billing problems, especially overages [fees for using services like texting and data beyond what's allotted in their plan] so in March we launched “Simply Everything” [an unlimited voice and data plan that costs $100 a month], and throughout this year you will see more and more simplified pricing from us. We are also getting our customers’ electronic signature on their account order in stores at the point of sale so that we can verify that this is in fact what they ordered. Then, for all new activations there is a welcome call – the first call that a customer makes is intercepted and a representative goes over what is on their account with them.

As of end of May we have also completed a 14-month process to convert all of our customers to one billing system. So customers that have both CDMA and iDEN [the two networks operated by Sprint] phones are now on the same billing platform, with one look and feel.

Are you seeing any results from these changes?

We’re already seeing improvement. I am a long way from declaring victory, but we have improved in two key areas – first-call resolution and customer satisfaction – for four consecutive months now.

But it’s not just improving the actual customer service you give subscribers, it’s also changing the company’s image. How long do you think that could take?

There is a lag time between customers experiencing an improvement and them getting the word out. How long will that take? I don’t know. I do know that we’re making progress. But this is more like steering an ocean liner than a speed boat.

By Michal Lev-Ram

Churn, or the rate at which customers defect to rival carriers, is one of the most important metrics for measuring the success of a wireless carrier.

Unfortunately for Sprint (S), it has one of the industry’s worst churn rates. On Monday it revealed that 1.09 million of its subscribers decided to take their business elsewhere in the first quarter as the company reported a net loss of $505 million, or 18 cents a share, compared to a loss of $211 million, or 7 cents a share, a year earlier. Revenue dropped 8% from a year ago to $9.33 billion. Excluding a number of one-time charges, such as job-cut costs and merger-related expenses, Sprint’s adjusted profit slid to 4 cents a share from 19 cents a year ago.

Meanwhile, rivals Verizon (VZ), AT&T (T) and T-Mobile (DK) saw their churn rates for postpaid accounts fall during the same period, and their customer base grow. Verizon added 1.5 million wireless subscribers, and 1.3 million new customers signed up with AT&T. Even T-Mobile, the smallest of the top four U.S. carriers, added nearly a million customers the last quarter, tipping its total subscriber base to slightly over 30 million for the first time.

Many of Sprint’s recently-departed subscribers also happen to be some of its best customers. That means that a large percentage of defecting Sprint users are the type of people likely to pay for higher-priced data plans, pay extra fees for text messaging and downloading ringtones or buy more expensive phones. That is a big part of the reason Sprint’s average revenue per customer declined by about $2 compared to the first quarter of 2007.

“We continue to place the highest priority on reducing churn by improving the customer experience,” CEO Dan Hesse said in a statement Monday.

He told analysts on a conference call Monday that he is investing to acquire new customers as well as to keep existing ones from fleeing.

Improving customer service and simplifying rate plans are two ways Sprint is trying to keep retain subscribers. Later this summer, the company will also launch an iPhone competitor it hopes will provide an incentive for customers to stay – current customers, as opposed to new subscribers, will have first dibs on a Samsung touchscreen called the Instinct.

But it will likely be some time before those changes turn around Sprint’s churn rate. Hesse, however, is optimistic. On Monday he told analysts that in March, “We began to see improving trends in churn.”

By Michal Lev-Ram

When Sprint Nextel CEO Dan Hesse joined the wireless company last December, he inherited a backlog of problems. Among them: The logistical nightmare of managing two different networks formed by Sprint’s merger with Nextel, a high rate of subscriber defections and a bad (okay, horrible) reputation for customer service.

At his first conference call with analysts in February after Sprint (S) announced disappointing fourth-quarter earnings, Hesse himself admitted that “the issues we face are more difficult than what I had expected to find.”

But that didn’t stop the former AT&T (T) executive from quickly implementing some much-needed changes. Within five months, Hesse has cut costs by closing 8 percent of Sprint’s retail stores and laying off nearly 7% of the staff. He also made senior management changes, launched a new unlimited voice and data plan, and just this week inked a joint WiMax venture with Clearwire (CLWR) and a slew of high-profile investors.

Now, as Sprint prepares to release its first-quarter earnings results Monday, investors are looking to Hesse to see what he’ll do next to turn the wireless carrier around.

“So far the read on him is cautiously optimistic,” says RBC Capital Markets analyst Jonathan Atkin. “He’s taken prudent steps to evaluate what the issues are, and made progress on his checklist – including the critical item of how to move forward with WiMax.”

Sprint’s investment in WiMax – a next-generation network that promises faster speeds well-suited for data services like web browsing and music downloads – has been a main point of contention among investors. Under former chief executive Gary Forsee, the company poured about $5 billion into the technology, only to find its cutting-edge service bogged down by delays and an inability to seal a WiMax partnership with broadband Internet provider Clearwire.

But last Wednesday the two companies announced they had finally come to an agreement and would combine their wireless broadband operations to create a $14.55 billion venture. Intel (INTC), Google (GOOG) and a handful of other companies have agreed to invest $3.2 billion in the new company.

In an interview with Fortune earlier this week, Hesse said the upcoming WiMax service will give Sprint a “differentiating advantage.”

“This allows us to be the only company to offer 4G [fourth-generation network] services,” said Hesse. “WiMax as a technology is available now and it works now.”

Of course, it’s still not clear exactly when the new service will be available to Sprint customers, though the Clearwire joint venture is expected to close by year-end. Sprint rivals AT&T and Verizon (VZ) have said they are committing to a competing fourth-generation network technology called Long Term Evolution, or LTE, which is expected to become available around 2010.

With its increasingly narrower time-to-market advantage, WiMax is still far from a guaranteed success. And in the meantime, Hesse has his hands full trying to put out other fires.

Come Monday, investors will be looking for news regarding Sprint’s core business, selling voice and data services on its CDMA network, which has been bleeding customers. Subscribers have also been defecting from the iDEN network the company inherited when it merged with push-to-talk service provider Nextel in 2005.

“We are still looking for evidence that Sprint is generating positive momentum around its postpaid marketing to return back to positive postpaid subscriber growth over time,” Citigroup analyst Michael Rollins wrote in a recent report.

In an effort to retain and attract customers, Hesse has already embarked on a new brand campaign that aims to position Sprint as the “superior network.” But Rollins says that the company hasn’t “gone far enough to differentiate its message on network quality perception or price.”

Hesse has also said that improving Sprint’s customer service is one of his top priorities.

“Not only are we not attracting enough new customers, but our existing customers are leaving us at too big a rate,” Hesse had told Fortune in an interview last February, after Sprint posted a fourth-quarter loss of $29.5 billion and a continued decline in subscriber numbers.

There’s no question Hesse has his work cut out for him. But if his first five months in at the company’s helm are an indication of what’s to come, you can count on seeing more changes at the number three mobile operator – for better or worse.

By Michal Lev-Ram

Just as one high-profile buyout bid is wrapping up, another may be beginning.

Deutsche Telekom AG (DT), the parent company of T-Mobile, is considering a bid to acquire Sprint Nextel (S), according to news reports Monday.

Shares of Sprint were up nearly 6% on the news, while Deutsche Telekom was down about 1.4%.

While Germany-based Deutsche Telekom has nearly 120 million customers worldwide, T-Mobile is the smallest of the top four mobile operators in the United States, with just 28.7 million subscribers. A combination with Sprint (which has about 54 million customers) would make T-Mobile the largest U.S. wireless carrier, ahead of rivals Verizon Wireless (VZ) and AT&T (T).

Last year, Deutsche Telekom said it would look at international acquisitions as part of a new growth strategy its CEO called “Focus, fix and grow.”

“We want to use our expertise to be able to grow in mobile communications, including the possibility of acquisitions, based on our strict business criteria,” Rene Obermann, the company’s chief executive, said in March 2007.

But while Sprint’s flagging share price, coupled with the benefits of its subscriber base and spectrum holdings, may make it an attractive target, some analysts say a buyout is unlikely to happen anytime soon.

Sprint has been struggling with customer service issues and managing the two networks it currently runs, and has also run into problems with the delayed launch of yet another next-generation network called WiMAX, now expected to roll out later this summer. All three of Sprint’s network technologies are different from T-Mobile’s GSM infrastructure, which means they’re compatible with different phones. Running all four could be a logistical nightmare for Deutsche Telekom.

Citigroup analyst Michael Rollins predicts that there’s a 25% chance of a Sprint acquisition — not just by Deutsche Telekom — in the next year.

“…The problems at Sprint are still deep-rooted and may deter a buyer in the near-term…” Rollins said Monday in a written report, adding that other potential obstacles to a deal going through include issues with regulatory approval and the difficulties of integrating Sprint and T-Mobile’s different networks.

A Deutsche Telekom spokesperson could not be immediately reached for comment. Sprint spokesperson Leigh Horner declined to comment on “speculation.”

Also on Monday, T-Mobile announced the New York City launch of its 3G network. It is the last of the top four carriers to roll out the technology, which provides customers with a higher-speed network well-suited for data services.

By Michal Lev-Ram

LAS VEGAS — The CTIA wireless trade show kicked off Tuesday morning with a slew of keynote speeches by Federal Communications Chairman Kevin Martin, Sprint (S) CEO Dan Hesse, Virgin Mobile founder Richard Branson and Robert Bach, president of Microsoft’s (MSFT) entertainment and devices division.

The Las Vegas-based wireless confab attracts more than 1,000 companies – including phone manufacturers, chip makers and mobile operators – and an estimated 40,000 show-goers.

This year’s event will likely center on the advent of so-called “open” networks, 4G technology and the continued blurring of the lines between consumer and business devices.

Tuesday’s star-studded speeches focused on all of these issues, and even managed to touch on the future of space tourism. The past year has been a big one for the wireless industry, with Apple’s disruptive iPhone launch, the FCC spectrum auction and the move towards more open networks.

FCC chairman Martin spoke about the recently-closed government spectrum auction, which raised nearly $20 billion. A portion of those airwaves will be used for a new network that will allow access to any device or service. Martin said that although the new conditions were initially opposed by the industry, a network that is more open to devices and applications can “help foster innovation and give consumers freedom.”

Virgin’s Branson shared his thoughts on Virgin’s nontraditional way of doing business and called the current economic downturn a “cycle that will turn around again.” The colorful entrepreneur also talked about climate change and his plans to send several dozen people (and animals and plant seeds) in a “Noah’s ark” mission to Mars. And yes, he also mentioned his company’s small mobile operator, Virgin Mobile.

Bach, president of Microsoft’s entertainment and devices division announced an update to the company’s Windows Mobile operating system for cell phones. The enhanced version aims to make finding applications on the phone easier and faster for consumers, and is part of Microsoft Window’s attempt to shed its image as a business-centric operating system.

Also on Tuesday, the CTIA released new industry survey results showing there are now 255 million subscribers in the United States, which means about 84% of the total U.S. population now owns a cell phone.

By Michal Lev-Ram

Sprint CEO Dan Hesse has been in office for just three months, but he’s already starring in the company’s latest television commercial — an ad for its new unlimited pricing plan, which offers both voice and data for $100 a month.

The black-and-white ad is the first in Sprint’s (S) new branding campaign, which will emphasize a more “immediate approach” to customer service and highlight the “capabilities” of the company’s products, according to a release issued by the company early Monday.

Last month, Hesse told Fortune that his number one priority is improving customer service, followed by rebuilding Sprint’s brand. The key to the company’s new identity, he said, would be building on its wireless data services like text messaging, Web surfing, videos and music and navigation.

“Every carrier in America does voice well — it’s really not a differentiator anymore,” Hesse said in a phone interview late last month. “You need to define what position you can occupy that is different and then execute around that.”

Sprint’s unlimited “Simply Everything” plan was announced after Verizon Wireless (VZ), AT&T (T) and T-Mobile unveiled similar plans. But Sprint’s was the only one to include full data services in addition to unlimited calls.

But even Hesse, who implies that the new unlimited plan is revolutionary in the new ads, admits that “Simply Everything” is not enough to fix the company’s many problems. Last month, after Sprint posted a fourth-quarter loss of $29.5 billion and a continued decline in subscriber numbers, Hesse told investors that a turnaround will not happen for “many quarters.”

By Michal Lev-Ram

Sprint chief executive Dan Hesse faced investors for the first time Thursday as the company delivered a slew of bad news, including a fourth-quarter loss of $29.5 billion and a continued decline in subscriber numbers.

Hesse, a wireless veteran, was brought in last December to replace ousted CEO Gary Forsee. Since then he has made several cost-cutting changes at the company — including laying off about 4,000 employees and closing 125 retail locations.

But Hesse is first to admit that fixing Sprint’s (S) woes will take much more. And the thing that needs fixing most is the Sprint’s reputation for dreadful customer service.

“The number one priority is improving customer service across all touch points, including retail stores, billing and customer care calls,” Hesse told Fortune.

That may be an understatement. In customer care surveys, Sprint regularly ranks lowest. It came in behind rivals Verizon Wireless (VZ), AT&T (T), T-Mobile and Alltel on a recent customer service performance study by J.D. Power and Associates. Bad customer relations has contributed to its high level of “churn,” the rate at which customers defect to other carriers. Sprint says it lost nearly 700,000 subscribers in the fourth quarter alone.

“Not only are we not attracting enough new customers, but our existing customers are leaving us at too big a rate — that’s why the customer service issue is highest on our list,” Hesse said Thursday after a conference call with analysts.

To that end, Hesse says he has changed the way the company measures its call centers’ performance. Instead of focusing on “handle time” — how quickly a customer’s issue is resolved — he says the focus is now on finding the right solution the first time a customer calls in, even if that means the call takes longer.

“Call resolution,” said Hesse, “is becoming the number one performance metric.”

Hesse is taking other measures to try to stop customers from fleeing. Earlier that day he announced the launch of Sprint’s new $100-a-month unlimited calling and data plan. The other major carriers launched their own unlimited calling plans last week, but unlike Sprint theirs did not include services like “all-you-can-eat” mobile TV, Web browsing and e-mail.

Hesse says his number two priority is re-defining Sprint’s brand, which he hopes to build around the company’s data services and the high-speed broadband network that enables them.

But some in the industry are calling for even more dramatic bigger changes, such as breaking up the company and selling off its pricey WiMax project, a next-generation wireless network into which the company has poured billions of dollars.

Hesse said he is still evaluating all aspects of the company’s operations, but that any turnaround is unlikely to happen for many quarters.

By Michal Lev-Ram

Sprint announced early Thursday that it would offer an unlimited voice and data plan, one week after rivals Verizon Wireless, AT&T and T-Mobile launched plans that let users make as many calls as they want for $100.

Dubbed “Simply Everything,” Sprint’s (S) new service will also cost $100 a month, but unlike its competitors’ plans, the third-largest carrier is offering unlimited data services in addition to unlimited calls. Analysts had speculated that Sprint would try to compete with other carriers by offering a lower-priced plan for about $60. Instead, the company is offering more features for the same rate.

“This is not so much about price, it’s about differentiating our company,” Sprint chief executive officer Dan Hesse said Thursday morning during a conference call with analysts. “We’ve let our business get too complex, and we’re trying to make it simpler.”

In addition to unlimited nationwide calling, Sprint’s new plan will give users unlimited access to data services like text messaging, e-mail and Web surfing in addition to the company’s mobile TV, music and navigation services. It will be available on all the company’s networks — both CDMA and iDEN — starting Friday.

Verizon was the first to announce its service last week, but AT&T and T-Mobile followed just hours later. T-Mobile’s unlimited plan includes “all-you-can-eat” text and picture messaging, while AT&T (T) and Verizon (VZ) are offering unlimited domestic calls only. The unlimited plans were a first among major carriers, as wireless consumers typically pick rate plans based on how many minutes they think they’ll use per month and are stuck with paying steep fees (as much as 45 cents per minute) if they go over their allotted airtime.

Sprint, which posted a fourth-quarter loss of $29.5 billion Thursday, says it is hoping its new voice and data plan will help differentiate the company.

But even CEO Hesse admitted that “Simply Everything” won’t be enough to turn things around. Sprint faces significant challenges, including integrating Nextel’s network and repairing its poor customer service image. What’s more, it is bleeding customers — the company reported that it lost 683,000 subscribers in the fourth quarter.

“Our business is not performing well right now because we have not provided the right customer experience,” Hesse said Thursday. According to the CEO, a turnaround will not happen “for many quarters.”