Print 43 comment(s) - last by Mike Acker.. on Dec 11 at 7:39 AM

T-Mobile won't subsidize the cost of the iPhone

Deutsche Telekom announced yesterday that T-Mobile would begin selling Apple devices next year. T-Mobile CEO John Legere went on to confirm that the iPhone would be among the Apple products the wireless company will sell next year. However, he is warning that T-Mobile will offer the iPhone in a drastically different way than other carriers. T-Mobile is ending subsidies on all of its phones.

What that means is if you want the iPhone on the T-Mobile network, you'll pay for the entire purchase price of the phone upfront rather than getting a discount in exchange for signing up for a contract. T-Mobile is planning to shift to unsubsidized Value Plans offering customers cheaper rates for voice and data.

T-Mobile has already stated that 80% of the activations it had last quarter were customers choosing its new Value Plans. The plans are so successful that T-Mobile believes there's a huge demand for the pay up front and get a discounted plan sales model.
It remains to be seen if T-Mobile customers are willing to pay full price for the iPhone when other carriers are offering them a significant discounts.

Pricing for the iPhone ranges between $650 to $850 for unlocked devices. However, it appears that T-Mobile has a plan to help offset the huge upfront cost for expensive devices such as the iPhone 5. Legere has hinted that T-Mobile will sell the iPhone for $99 upfront and in charge subscribers $15 - $20 a month in payments over the following 20 months.

Source: Gigaom

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By othercents on 12/7/2012 8:55:24 AM , Rating: 5
There really wasn't a reason not to offer the iPhone in this manner. I wonder if the T-Mobile and Apple contract actually required T-Mobile to pay Apple like Sprint did, or just gave them the ability to sell the unlocked phones that are already on the Apple website. I think this could be a win for both companies.

Legere has hinted that T-Mobile will sell the iPhone for $99 upfront and in charge subscribers $15-$20 a month in payments over the following 20 months.

This sounds more like a line of credit instead of part of the service account. This should mean that you can switch carriers with your phone and still make the credit payments to T-Mobile and your service payments to another carrier.

I think T-Mobile has it right especially when you are looking at lower cost phones. You already get a $20 or more discount on the Value Plans they offer which over 2 years is about the cost of an S3. Other carriers don't give you a discount on the plan after the phone is paid for, but T-Mobile does. If you can stand sticking with an older phone for 3 or 4 years you can save significantly.


RE: Exactly!!!
By quiksilvr on 12/7/2012 9:20:39 AM , Rating: 5
This is how all phones plans should be. Pay full price for a phone, get a cheaper plan and don't be tied to any useless contracts.

That's exactly what I have now in fact. 2 lines, unlimited talk and text, and 2GB each for $100 a month.

RE: Exactly!!!
By V-Money on 12/7/2012 11:13:28 AM , Rating: 2
Same here, in fact I just switched to that plan when I added someone to my account. Before I was paying 70 for 550 min, unlimited texts and unlimited internet (4g up to 2GB)and she was paying 50 for 550 minutes and unlimited texts. Now both cost 99 a month for unlimited everything (4g up to 2GB).

I got out of my 2 year contract because I bought my last phone (galaxy nexus) unlocked from the UK before they were offering them here, so I didn't re-up my contract. She has just had her phone forever and doesn't want to upgrade yet.

RE: Exactly!!!
By Souka on 12/8/2012 6:41:59 PM , Rating: 2
I bet that iPhone5 with a subsidized contract would have likely been cheaper than a non-subsidized contract and 2-years of service.

Just a hunch...

RE: Exactly!!!
By just4U on 12/8/2012 10:11:00 PM , Rating: 2
I wish we could get plans similiar.. Here in Canada for two phones the cheapest I could find included 1G of data Unlimited evening/weekends 600 min a month daytime /w free text all for the low low price of $175 a month. Includes 30 free long distance minutes but you can add unlimited to each device for another $100.

RE: Exactly!!!
By StealthX32 on 12/7/2012 9:24:31 AM , Rating: 3
Hopefully mfgs follow the Nexus 4 pricing model and price their phones affordably as well.

I really want this to succeed (selfishly because I'm a T-Mobile customer and wouldn't want them to leave the US market as they were threatening to do earlier), but I'm also not convinced the average American consumer can figure out that getting a phone FREE and being locked into for 2 years is worse than paying up front for a phone and having a lower overall rate.

RE: Exactly!!!
By mcnabney on 12/7/2012 9:44:52 AM , Rating: 3
It is the same model as credit. Paying up-front always saves you money. But customers want their shiat NOW and try to figure out how to pay for it later.

RE: Exactly!!!
By Schadenfroh on 12/7/2012 1:11:48 PM , Rating: 2
I agree, but the reason that phone hardware subsidies are so popular is that consumers see a $200 iPhone and lack the basic business sense / patience to realize that they are paying far more in service costs than they would if they were to just pay full price for the hardware and get a cheaper plan.

RE: Exactly!!!
By name99 on 12/7/2012 4:04:47 PM , Rating: 4
You are assuming that it is BUYERS who want subsidized plans.
I don't believe this is true. It is CARRIERS that want these plans.

They sound reasonable IF you replace your phone on the dot every two years --- but for every month that you don't replace your phone, that's "subsidy" payment you are making to the carrier in return for nothing.
The joke has, however, been on the carriers when it comes to iPhone, because the new devices are so well advertised, and the update schedule is predictable enough, that most customers HAVE upgraded at close to two years, on the dot. My guess is that T-Mo has noticed that, and concluded they won't lose much by doing things this way.

It's not clear if the other carriers will follow.
In the first place, I suspect they get a lot of value out of subsidies for their non-iPhone customers.
In the second place, I think the grand days of obvious, important phone improvements are close to an end. With every previous iPhone, there were obvious hardware limitations that one wanted fixed and thus an obvious reason to upgrade after two years; with iPhone5 this is far less clear. [In the vain hope of keeping this thread adult, let me point out that this is about whether CURRENT iPhone5 owners will feel a strong reason to upgrade; it is not about how Android or MS users think iPhone5 sux and NEEDS an SD slot, a larger screen, quad-core, or whatever your obsession may be.]

So while this move will keep T-Mo alive for a few more years, as various malcontents with the subsidy model move to it, I suspect it will not change the industry. The carriers find substantial value in the subsidy model, and that value will, I suspect, rise over the next few years.

RE: Exactly!!!
By mcnabney on 12/7/2012 10:56:34 PM , Rating: 2
Buyers want it more.

T-mobile has had discounted, contract-free service for a long time. And they have lost hundreds of thousands of customers every quarter. If customer's really valued it, T-mobile would be gaining customers. People might gripe about contracts, but they like getting expensive devices for cheap more.

RE: Exactly!!!
By Rukkian on 12/10/2012 10:20:41 AM , Rating: 2
I don't see how the unsub phones had anything to do with their subscribers as they have also had subsidized if you wanted them. While it was easier to see the difference (monthly price difference) I don't see how that would turn somebody off to have options.

Not having the iphone, having poor coverage in numerous areas, not have 4G lte, and possibly going under to me are the reasons for the low subscribers.

RE: Exactly!!!
By semiconshawn on 12/7/2012 2:15:42 PM , Rating: 3
How are you locked in? ETF is $350 phone was $199 thats $550. Still cheaper than buying the phone out right. I love when I hear people complain they are "locked in" to a phone contract. NO YOU ARE NOT. Pay the ETF and leave you poor slobs....If you cant afford that then you shouldnt be smart phone shopping anyways. You are broke.

RE: Exactly!!!
By RufusM on 12/7/2012 9:28:15 AM , Rating: 2
This is part of the holy grail of cell service; separating the hardware from the cellular service. Next up, Android and Windows Phone OEMs, separate the OS from the hardware so all of said phones get updates directly from Google and Microsoft, please. :)

If marketed right, this can definitely be a competitive advantage for T-Mo. Once this launches they need to start advertising how the new way saves money and eventually start advertising how the other carriers are fleecing their customers with hardware subsidies. I've been on prepaid for several years and it's finally gotten to the point in the past year or two where I could have a normal unlocked high-end phone on a decent network without a two year contract. I love it!

RE: Exactly!!!
By mcnabney on 12/7/2012 9:43:17 AM , Rating: 2
The only benefit the other carriers have is when customers don't upgrade promptly. When a person is off-contract they are 'still paying the subsidy rate', which is free money for the carrier. However, the carriers don't want that because customers that are off-contract are far more likely to leave - so they want to get them upgraded and back under contract even though it is less lucrative.

RE: Exactly!!!
By mcnabney on 12/7/12, Rating: 0
RE: Exactly!!!
By RufusM on 12/7/2012 10:02:26 AM , Rating: 3
I'm sure there are some stolen iPhone's on T-Mobile, but there is also an entire black market export industry for unlocking and selling them outside of the US.

RE: Exactly!!!
By Motoman on 12/7/2012 10:19:05 AM , Rating: 1
I have said for a very long time that this is the way things should be done. Subsidizing the phone cost into a long-term contract just obfuscates the true cost of the phone...and consumers, sadly, are far too daft to figure out what's going on.

Selling the phone outright and then providing whatever service you want at affordable service-only prices is a vastly more transparent and honest system.

In an ideal world, the cell phone system would work exactly the same way the landline phone system works. You buy a phone at a store...any phone you want. Then you contact a phone service provider...any provider...and set up service. If you decide later you don't like that provider and want to just switch.

No strings attached, no penalties, no nothing. That is the way it should be.

RE: Exactly!!!
By V-Money on 12/7/2012 11:20:44 AM , Rating: 2
I figured this out the first time I went to the UK back in 2008, it cost me less to call the US on my cellphone (that I bought for 10 pounds (20 Dollars)) than it did for my plan in america(it was 3/pence a min, the exchange rate was 2x at the time).

Also, they didn't charge for anything incoming i.e. you weren't charged for incoming calls or texts. The next time I went I had my Nexus one and was able to just get a sim card, very cheap and effective and I still had my smartphone. We are definitely getting royally screwed here.

RE: Exactly!!!
By inperfectdarkness on 12/8/2012 6:46:22 AM , Rating: 2

People like me--who had their phone for 3.5 years don't get a break on their bill after the 2-year contract is up. That's the #1 reason I'm using pre-paid right now--because I don't want to deal with that BS.

At the very least, companies should offer automatic bill reduction after the original term of the contract is up. Of course, that would impact their bottom line, so it's against their greediness to do so--even if there is ample justification for it.

RE: Exactly!!!
By Wererat on 12/10/2012 1:17:53 PM , Rating: 2
"If you can stand sticking with an older phone for 3 or 4 years you can save significantly."

And if you can't, drool over the whateverphone version N+1, or just have buyer's regret, someone else will be happy to pick up your used phone and help you offset the cost of your next phone.

(Conversely, people who don't need/want the latest thing will be able to buy a used whateverphone and roll it into a no-contract plan, which is very sensible in the same way buying lightly used cars is a great way to save $).

"Nowadays, security guys break the Mac every single day. Every single day, they come out with a total exploit, your machine can be taken over totally. I dare anybody to do that once a month on the Windows machine." -- Bill Gates
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