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T-Mobile to drop phone subsidies in 2013

updated 05:12 pm EST, Thu December 6, 2012

Initiative announced in company's annual investor conference

During Deutsche Telekom's annual investor conference, T-Mobile USA CEO John Legere announced his intent to do away with subsidies for cellphone purchases with contracts. Legere said that customers will pay an upfront fee for the devices, and pay the remainder of the phone's value in affordable monthly installments.

T-Mobile currently offers a "Classic" plan that subsidizes the device, requiring a two-year contract. The carrier's "Value" plan allows consumers to pay the full cost of the phone in exchange for lower monthly plan rates. Legere said the initiative to do away with the Classic plan will begin in 2013, and only the Value plan will be offered going forward.

Legere claimed that "We think there is a huge room for a carrier to change in a way that the larger players will choose to or will not be able to respond to." He added that consumers will be able to purchase the "most iconic device in the world," presumably the iPhone, for $99 and pay monthly installments of between $15 and $20 for 20 months after purchase.

Legere noted that T-Mobile will directly target AT&T in its forthcoming advertising, saying that he is "very certain in the coming months you are going to see dramatic change." Legere said that the tactic slams AT&T, while praising the iPhone, and to "get used to that tone because that is the way we're going to play."



By Electronista Staff
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  1. SegNerd

    Fresh-Faced Recruit

    Joined: 07-27-12

    I don't understand this at all. They are getting rid of the subsidy, and instead you can "pay an upfront fee for the devices, and pay the remainder of the phone's value in affordable monthly installments."

    Perhaps they are also getting rid of phones, and instead giving you a portable electronic device that you can use to call people and access the Internet???

    I don't understand how this affects the actual deals or plans, other than changing the names of things.

  1. climacs

    Forum Regular

    Joined: 09-06-01

    re-read the article:

    The carrier's "Value" plan allows consumers to pay the full cost of the phone in exchange for lower monthly plan rates.

    Right now, every subscriber at all major carriers with a subsidized phone has an incentive to update that phone every two years when their contract comes up for renewal: you're paying the same rates whether or not you have a subsidized phone.

    Presumably the value plan's monthly bill should be $15-$20/mth lower than a comparable classic plan's monthly bill.

  1. bjojade

    Fresh-Faced Recruit

    Joined: 06-07-07

    This should be good for the consumer, as it can result in lower costs if you don't regularly replace your equipment. However, it's not good for Apple, as now to replace your phone doesn't just cost $199, it also can result in a higher monthly bill.

    Also, on the cheapie phones that wear out, it was easy to just go in and get a new one every couple years when yours wore out. Now, people will hang on to a half working phone forever instead of spending $100 to replace it when it really should be replaced. And they'll be calling into support constantly complaining that it's not working.

    It'll be interesting to see how this works out for them.

  1. Bittyson

    Fresh-Faced Recruit

    Joined: 09-21-11

    Of course a ton of people are going to be excited to pay the full $600 price of the iPhone up front to have the pleasure of enjoying T-Mobile's dead zones at the discounted rate that it deserves. AT&T and Verizon must be howling at this one. More up front for worse service, but cheaper (for now). Pass.

  1. blahblahbber

    Banned

    Joined: 02-01-05

    ok, this is how it works: T-mobile would rather have customers pay a separate payment (contract) for the phone by itself. They have been doing this since last year to date.

    And if you don't pay your payments for your phone, eventually your phone will be blacklisted on the t-mobile networks, so the only way around that is using a tool called "octopus" to change the IMEI # to identify yourself as a different phone/user. That is why it is not wise to buy used t-mobile cell phones anymore unless you can somehow verify the phone has been fully paid for or has been released before the implementation of this type of contract.

  1. TheMacMan

    Fresh-Faced Recruit

    Joined: 08-06-06

    This actually doesn't make sense, $99 upfront, pay $15 - $20 per month for 20 months. The incentive is you'll save $15 - $20 per month. ??? Net difference equals zero. And T-Mobile is still paying for the iPhone upfront to Apple, so I think this is still subsidizing. Am I missing something here?

  1. Arty50

    Mac Elite

    Joined: 05-23-00

    I actually love this. I'm on a 3GS that is well out of contract and there's absolutely no reason I should be paying the subsidized rate for my service anymore. Yet I am. Why? Because I have no choice but to do so. T-Mobile will now give consumers that choice. Better yet, they'll let you pay for the phone over time instead of having to pay for it all up front. It's the best of both worlds. This is the european model from what I understand, and I'm glad it's coming here finally.

  1. efithian

    Fresh-Faced Recruit

    Joined: 04-21-04

    In addition to three iPhones that are on T-mobile pay per call, I have an iPhone 4S unlocked that is on ATT and an iPhone 5 under contract with ATT. My ATT bill pays for the subsidized rate for the iPhone 4S, even though it is no longer under contract. My next iPhone will be under T-mobile, where data is unlimited and coverage is as good or better than ATT, and is half the price. In my current Audi, it has T-mobile data. My iPhones hook up with bluetooth and the car shows the wireless reception levels for both ATT and T-mobile. Most of the time the T-mobile connection is better than ATT. Lehigh Valley, PA with no LTE for ATT.

  1. Grendelmon

    Dedicated MacNNer

    Joined: 12-26-07

    Well, I just ordered an iPhone 4S for my wife for Christmas from Virgin Mobile. It will be the first iPhone in the household (actually the first smart phone) but she's on her iPod Touch all the time. We're essentially consolidating her devices.

    Virgin Mobile's 4S was $450 up front. Their price just dropped $200 in the last month (and the iPhone 4 is now $350). But with the minimum 300minute voice plan, we are getting unlimited data (throttled @ 2.5gb, but we will never hit that) and unlimited texts. For $35 a month. And no contract.

    If you do the numbers, the 4S on Virgin compared to "other" legalized extortionists comes to a savings of over $1,000 over 24 months. Most Americans are scared of up front costs and like to "finance" their cellphones through hefty monthly rates. But we refuse to pay $60+ a month for a freaking smart phone.

  1. ibugv4

    Fresh-Faced Recruit

    Joined: 06-12-03

    I did this two years ago -- I got a Motorola Charm and opted to "finance" the phone separate from the service (at the time I'd brought a phone in to start the service, thus getting the value plan).

    All in all, it was cheaper. The monthly service was roughly $20 a month cheaper, and the phone was $5 a month over 20 months. I was under no contract or commitment, when I cancelled the service I was sent a bill for the remainder of the phone's purchase price balance.

    Factor that in to ATT or VZW...ATT is the better of the two as the $300 cancellation fee is prorated each month you keep service, but Verizon wants over $300 regardless of how long it is (days, weeks, months) before your contract ends. With T-Mobile, you're only on the hook for the phone's remaining balance.

    This is a very European, consumer-centric offering. I will be going back to T-Mobile in the future.

    Also, I've traveled across the US by car with T-Mo, ATT, VZW. All three have dead spots, no data service spots. T-Mo, because of ATT BS, does not have service for about 30 miles on I-40 in Arkansas in my experience. Once you cross the state line, it comes back in Texas immediately. Could have been the phone, but ATT did this to T-Mo in NC (where I live).

    All in all, T-Mo's plan is far cheaper over 24 months than a comparable plan from ATT or VZW *for the exact same phone.*

  1. SegNerd

    Fresh-Faced Recruit

    Joined: 07-27-12

    Originally Posted by climacsView Post

    re-read the article:



    You re-read the article: The Value plan already exists. It is not part of the change. If this were a story about introducing the Value plan, I would understand.

    What the story says is that T-Mobile already has a Classic plan and a Value plan, and that they are getting rid of the Classic plan and replacing it with something that is pretty much identical to the Classic plan.

    Other posters are correct in stating that if you never upgrade your device, the replacement does have the advantage that your bill goes down once you have paid off your phone. But for anyone who upgrades their phone (which I think most people probably do), this is really no different than a shrinking ETF with a different name.

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