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 4:04:47 PM
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.
12/7/2012 10:56:34 PM
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.
12/10/2012 10:20:41 AM
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.
"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
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