Have you tried the 'network mode' settings in 'settings>wireless & networks>mobile networks'?

Are you sure the phone is unlocked?

are you sure the sim card works?
Have you tried it in another phone?
Is the sim card really, really old? there are some older sim cards that might not work in this phone.
Have you tried a different sim in the phone?

That's about all I can think of.

 

Cyberiaa, I too had this problem. My handset was a HTC Desire. I've had the handset for 3 weeks now. I first noticed this problem about 3 days after I got the phone.

The sim card in the phone, would intermittantly stop communicating with the phone (quite frustrating). It originally lost all signal with the network while I was on a train and took over 45 minutes to recover. During this time the Handset could not see any network when I scanned for them. The train was passing through a dense urban area so I would assume that there was no problem with coverage. The only way I could restore frunctionality was to reboot the phone. I tested the sim card out in a 2G iPhone and a Nokia 6300 I had lying around the house. The SIM was recognised in both of these devices and the phone worked correctly. The problem became more frequent and eventually rebooting the phone would fail to correct the problem, at this point I thought a had a faulty handset. I did some research on other forums and they all stated to swap the SIM card for a new one that my network provider would provide for me. I did this and since have had no problems. It's only be 6 hours but there is no sign of the problem re-occuring. If it does I'll come back and repost. Otherwise you can assume that my troubles are over. I hope this helps.

 

Changing the SIM card worked for a day unfortunately I'm back to square one. I'm really not impressed with this problem. I'm going to send the HTC back for repair / exchange but to be honest I think this is a bit of deal breaker. If I run into anymore problems then I think i'll be avoid the HTCs in the future and possibly go back to the iPhone, shame really cause I was really starting to like the Android platform

 

OK my account manager replaced the phone for me, it was primarily happening when I was on 2G coverage a work around that I used was to select 3G / WCDMA only, untill my replacement handset arrived.

 

Back to the OP...looks to me like your handset is locked to the network, and your SIM is for a network that isn't T-Mobile.

My best guess anyway

 

This has just happened to my wife's Desire S. It's an unlocked, non-rooted phone. Last night it starting showing no service, but continued to accept data over GPRS. I've tried multiple network sim cards in it to no effect. When I attempt to connect to any network it says that my sim card won't allow it ("Your sim card does not allow a connection to this network."). I intend to get a fresh sim card from her network tomorrow, however since i've tried several other networks I don't hold out much hope.

Has anybody else seen this and solved it without replacing the phone? I can certainly get a refund from the place where I bought it, probably not a replacement, but i'd rather not.

Interestingly when I select "Preferred network mode" I can only select "GSM/WCDMA auto".

Android version: 2.3.5
HTC Sense version: 3.0
Software Number: 2.10.401.8