T-Mobile to End Smartphone Subsidies, Offer Cheaper Value Plans
December 7, 2012 8:40 AM
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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.
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12/7/2012 9:28:15 AM
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!
12/7/2012 9:43:17 AM
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.
"People Don't Respect Confidentiality in This Industry" -- Sony Computer Entertainment of America President and CEO Jack Tretton
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