Deutsche Telekom
’s (DT) wireless unit T-Mobile USA launched myTouch 3G smartphone across the U.S. and Puerto Rico yesterday. The highly anticipated handset will feature in more than 4,000 RadioShack Corp. (RSH) stores.

This is T-Mobile’s latest effort to counter strong competition from its peers in the US smartphone market. Driven by the newly launched myTouch 3G, the company will be better positioned to lure more users into its 3G network.

T-Mobile myTouch 3G represents the follow-up to the G1 android phone which the company launched in October last year. Unlike G1, which has a physical keypad, the new handset is a full touch screen smartphone, powered by Google Inc.’s (GOOG) revolutionary android software.

T-Mobile G1 generated healthy customer response and the company has already sold over 1 million phones. However, android-based phones are being significantly challenged by the iPhone 3GS by AT&T (T) and Palm Pre by Sprint Nextel (S). iPhone 3GS sold 1 million units within the first three days of being launched while Palm Pre has also received favorable customer reviews.

T-Mobile myTouch 3G integrates several attractive features that are similar to iPhones, including a similar screen size. Besides a significantly slimmer appearance, myTouch 3G also has improved battery life compared to G1 and is embedded with advanced multitasking capabilities and official Microsoft Exchange Support. These advancements are expected to enable the new device to draw broader customer appeal than G1.

However, the price point of myTouch 3G remains an issue. T-Mobile USA is offering the handset for $199 with a 4-GB memory capacity in a two-year contract. In contrast, iPhone 3GS and Palm Pre are being sold at the same price for 16 GB and 8 GB storage capacity, respectively. As such, it still remains to be seen how much traction myTouch 3G generates in the presence of these competitive offerings.

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