How to make hotspot work on iphone 3gs?

I have TMobile service and own a phone that works well--both Wi-Fi and hotspot--being 4g. I do want to get an iphone but my contract with tmobile is not up for renewal until 2014.So, my friend, who recently got a new iphone, got her 3gs iphone unlocked and gave it to me. I love it but:
1) the bar on top of the screen keeps showing tmobile E…
2) hotspot don't work!
3)when I'm out it starts loses network on and off.
What should I do?

Firstly, I think you need to purchase a hotspot feature on Tmobile to get hotspot to work. (or maybe not as I just read it's included in your data)

Secondly, your friend's unlocked iPhone 3GS data does not work on your T-Mobile Network. The reason is your friend's unlocked iPhone 3GS data can't connect to T-Mobile's 1700 AWS Band (which is what TMobile is on.)

Thirdly, I don't think iPhones work on T-Mobile's data network and if it is it might only be the iPhone 5.

So to answer your question:
1) the bar on top of the screen keeps showing tmobile E…
-Yes that's how it should be.

2) hotspot don't work!
-No it won't work on Edge.

3)when I'm out it starts loses network on and off.
-Yes because your friend's unlocked iPhone 3GS is not compatible with the 1700 AWS network of TMobile. If you were on AT&T then yes, your friend's unlocked iPhone 3GS would work PERFECTLY.

You should try getting a Tmobile phone like the Samsung Galaxy S2. If hotspot doesn't work or they charge you for it, you ROOT it and there's a hotspot hack that will work on it.

Hope that answers your question.