T-Mobile Gets the IPhone, Ends Subsidies in 2013

The day has finally dawned: T-Mobile is getting the iPhone in 2013!

John Legere, T-Mobile USA CEO, said earlier this week that T-Mobile has agreed to purchase the iPhone to sell in its stores. The reason is simple: the iPhone has been the one product missing in T-Mobile’s strategy to compete with other top phone carriers such as AT&T, Sprint, and Verizon Wireless.  T-Mobile lost 700,000 customers earlier this year due to the iPhone’s absence. According to Legere, there were large numbers of customers who would not come to the store because T-Mobile did not sell iPhones. While the iPhone is not the only thing that will make the carrier competitive, it is what Legere called in his Deutsch Telekom meeting “the final piece” of the company’s competitive strategy.

It is no secret that iOS has been Android’s greatest rival since the iPhone emerged in 2007. T-Mobile has been kind to Android and its manufacturers but has not been as kind to Android’s rival iPhone manufacturer. Legere said in his presentation at the Deutsche Telekom Capital Markets Day 2012 that T-Mobile’s goal in its network transformation and improvements in smartphone plans and customer service is to eliminate the “pain points” that so many customers have with T-Mobile in order to generate sales and create numerical and financial growth.

With this goal in mind, Legere also announced the end of contract plans and the inauguration of non-contract “Value Plans” in 2013. Currently, T-Mobile’s Value Plans are for customers who sign a two-year agreement; 2013 will remove contract plans and require customers to pay for their devices over a period of two years. However, unlike contract plans present and past, the new non-contract plans will allow customers to either a) bring their own device (BYOD, bring your own device) or b) pay $99 down and then pay an extra $15-$20 a month on their phone bill in order to cover the remaining cost of the phone. What this will do is allow customers to pay a little each month towards owning their device while allowing them to opt-out of their current agreement at any time. In other words, if an individual wants to own the latest iPhone every 6-8 months, he or she will be able to do so without feeling any remorse over his or her former non-contract agreement. Customers who opt out of their agreements before paying off the entire cost of the phone will receive monetary value towards the purchase of a new iPhone or alternative smartphone.

I wrote in an earlier article that Apple’s new product cycle of six to eight months will cause problems for carriers who insist on maintaining their two-year agreements and requiring early termination fees (ETFs) for those who seek to escape their current agreements. T-Mobile and Metro PCS (who will merge to create NewCo by May 2013) have planned a proper response to Apple’s new product cycle: rather than fighting the cycle and maintaining its strict agreements, the two companies have decided to change with the times – that is, grant customers the right to opt in and out of agreements when they want and allow customers to pay for their phones through a monthly rental process (while eliminating the contract restrictions). T-Mobile’s new plans should make for an interesting competition in the carrier space in the new year.