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  (Source: Dreamworks Pictures)
Some are interpreting bump as push to move customers into value plans

Deutsche Telekom AG's (ETR:DTE) T-Mobile USA has struggled lately, shedding 700k customers in Q4 2011 and committing to painful layoffs.  The carrier -- America's fourth largest -- still represents a strong value, and recent additions -- such as on-demand $10 USD/month unlimited calling option that is added or dropped automatically to prevent overages -- sweeten that deal.

I. Higher Prices -- For the Classic Plan 

The company is now making a risky move in a bid to drive customers from the discounted hardware "Classic" plans, into the more European "Value Plan", which requires customers to buy their own hardware.  

To push customers in that direction, T-Mobile is bumping data rates on its top tiers.  Effective April 4, data rates will bump from $20, $30, and $60 USD/month for 2, 5, and 10 GB, respectively to $20, $35, and $65 USD/month, an increase of $5 on each "Classic" plan (except for the 2 GB plan, which holds steady).

To be fair to ol' pinkie, the carrier's rate is still lower than its competitors.  For example, during its double data promotion Verizon Wireless -- a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc.'s (LON:VOD) -- offered customers 4 GB for $30 USD/month, 10 GB for $50 USD/month, and 20 GB for $80 USD/month.  In other words, T-Mobile's new pricing still beats Verizon's temporary discount at the more common 5 GB tier, though faltering at the higher tiers (a 20 GB option isn't even offered).  

And also consider that when you go over your limit on Verizon you get hit with overages, where as on T-Mobile you just get throttled; your connection is "unlimited" price-wise, though not speed-wise.

A price bump is a bit of a psychological blow to T-Mobile's image as a budget carrier.  So why would it do it?  Well, it appears that T-Mobile is pushing customers to adopt its Value Plans.

Data Plans T-Mobile
T-Mobile is making it more expensive to stick with the Classic plan. [Image Source: TmoNews]

II. Will T-Mobile's European Strategy Win Over American Consumers

T-Mobile's Value Plans definitely go against the status quo in the U.S. market, which is to offer discounted handsets, but at the cost of more expensive contracts.  By contrast, T-Mobile's Value Plan offers no handset discounts.  

The very European plan urges customers to buy their own handsets at full price.

The payoff comes when you get cheaper contract rates.  Before contracts were $5 USD/month cheaper for the voice plan, and $5 USD/month cheaper for the data plan (except for the 2GB plan, which was $10 USD/month cheaper).  The new rates raise the relative difference to $10 USD/month on all tiers of the data plan.

In other words, you may pay for that phone up front, but you'll save $15x24 = $360 over your 2 year contract.  Further, you can always bring your smartphone from another carrier over to T-Mobile and take advantage of Value Plan pricing.

For the most part Sprint Nextel Corp. (S), AT&T Inc. (T), and Verizon Wireless all practice the same policy -- premium plans, discounted hardware.  T-Mobile is trying something a bit different -- well, on some of its plans at least.  While its traditional plans are increasingly less attractive, T-Mobile does of course still offer the aforementioned discounted hardware-based "Classic" plans, as well.

T-Mobile wide

In terms of carrier mobility, there's really not much of a difference between the plans.  On T-Mobile you'll be jumping to a more expensive carrier, losing your chance to repay your hardware with your value plan if you switch.  On the flip side of the coin, if you get discounted hardware from, say AT&T, and switch to T-Mobile, you'll be hit with early termination fees -- either way there's a financial downside, T-Mobile's is just structured in a bit less punitive manner.

One final factor to consider is that T-Mobile is the only carrier to have no concrete plans to deploy LTE [1][2][3].  While it still continues its slightly sad "4G" rebranding of HSPA+ -- a technology referred to as "3.5G" by experts on standards committees -- the much faster LTE of Verizon and AT&T is nowhere to be seen.  

T-Mobile's handset selection also leaves much to be desired, though you can always buy an unlocked handset like a $480 USD Galaxy Nexus from or a $730 USD unlocked iPhone 4S from Apple, Inc. (AAPL).  Given the Value Plan discounts, these phones would end up draining your wallet roughly $120 USD and $370 USD, respectively.

Ultimately, T-Mobile USA may be fighting a culture war -- while its competitors may be more expensive over the full life of a contract, their phones are dramatically cheaper up front.  In that regard they appeal to the impulsive American customer, where as T-Mobile's more measured approach may not be as psychologically as compelling.

Source: TMONews



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This article is over a month old, voting and posting comments is disabled

Sounds good to me!
By Trisped on 3/27/2012 6:42:58 PM , Rating: 2
(warning, long rant)

I like the value plans. The last phone I bought was "free" with my online purchase credit of $50. I do not understand why my "free" phone cost $75 in taxes, I could have gone down to the local electronics store and bought the prepaid version for $50, so I should have paid $3.75 in tax. More realistically, since I am paying tax on the contract which is subsidization the cost of the phone I should not have paid any tax on the phone at all.

Also, I do not buy a new phone every two years, and when I do I usually get a low cost, dependable phone. I should not have to pay the same as someone who received a $200 phone this year when I have kept the same phone for 3 years.

I also like the idea of buying my phone from a third party. I do not walk into Best Buy to buy a TV, I shop online and find the best deal, then pay to have it shipped. I feel this keeps prices down for everyone. If every has to buy the phone from the carriers store it gives the carrier a monopoly which allows them to claim my "free" phone was actually $360 which have to pay luxury tax on.

The ability to buy phones from third parties also limits the ability of service providers and phone manufactures locking me out of buy a phone because my service provider did not sign a contract with them for it. If they wanted to succeed in the market the phone would have to be carried by most retailers allowing anyone to buy it.




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