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T-Mobile: No contracts, and cheaper iPhones

T-Mobile USA, the struggling wireless carrier, has a ray of hope: It's finally getting the iPhone, it's selling the device at an aggressive price, and customers won't have to sign a contract.

Instead of offering annual contracts to consumers, the company will charge users month to month. T-Mobile is the first major U.S. carrier to break from contracts.

"Stop the bullshit," Chief Executive John Legere said in New York on Tuesday, referring to the traditional pricing setup pushed by Verizon, AT&T, and Sprint. "Carriers are really nice to you … once every 23 months."

He said that over two years, an iPhone on T-Mobile will cost hundreds of dollars less than it would on AT&T.

"Do you have any idea what you're paying?" Legere said about phone contracts. "You pay so much for your phones, it's incredible."

The iPhone 5 will be available at T-Mobile starting April 12 for $100 up front, with customers paying an additional $20 a month for 24 months for the handset. Other new smartphones, like the Samsung Galaxy S IV and the BlackBerry Z10, will be available with similar payment plans.

For $50 a month, under T-Mobile's Simple Choice Plan, customers can get unlimited minutes, text messages and 500 megabytes of data; they can pay an extra $20 for unlimited data.

Verizon Wireless charges $90 for 1 gigabyte of data and offers 4 gigabytes for $110 and AT&T charges $95 a month for 1 gigabyte of data and $110 for 4 gigabytes of data. The iPhone 5 costs at least $199 on their networks with a two-year contract.

When the phone is paid off under the T-Mobile deal, the $20 fee disappears. On traditional contract-based plans, the buyer is deemed to have ''paid off'' the phone after a certain period of time and become eligible for a new, subsidized phone, but the monthly payments don't decline.

Under T-Mobile's plan, once the phone is fully paid for, the company will unlock the phone with no questions asked, allowing users to select any carrier they wish.

After explaining the plan, Legere reiterated that because customers won't be tied to a service contract, "if we suck this month, drop us."

Although there would be no contract binding customers to T-Mobile, customers would have to pay off the balance they owe on their phone to end service before the two years are up.

Phone industry analysts said Tuesday that while they believed no-contract deals will eventually come to the rest of the American phone market, Verizon and AT&T will be slow to respond. Simply put, they don't need to — they're already on top.

"Being in last place, [T-Mobile] has nothing to lose so they have the freedom to experiment like this," said Chris Silva, an analyst with the Altimeter Group. "Now having MetroPCS and foreign ownership, they don't look like a traditional American-owned company. I'd love to see more of this, but I don't expect to see more of this in the next 18 to 24 months. Beyond that we can dream."

T-Mobile's 4G LTE network will debut in seven major markets: Baltimore, Houston, Kansas City, Las Vegas, Phoenix, San Jose, and Washington, D.C. By the end of the year, T-Mobile says, it will be available where two-thirds of the nation's population lives.

T-Mobile said it will also offer the iPhone 4S, for $70 with 24 monthly payments of $20, and the iPhone 4 for $15 with 24 monthly payments of $15.

The company said Blackberry's new touchscreen Z10 smartphone is on sale now and will cost $100 up front with 24 monthly payments of $18.

Reporting: Los Angeles Times, New York Times, Wired.com, CNN.com, Associated Press, Arstechnica.com.

T-Mobile: No contracts, and cheaper iPhones 03/26/13 [Last modified: Wednesday, March 27, 2013 9:23am]
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