Under the Simple Choice plans, T-Mobile finances the new phone at no interest. The subscriber makes payments on the phone as part of the monthly bill, but only until the cost of the phone is paid off.
Target: iPhone users
With the new Simple Choice plans, T-Mobile hopes to attract customers from AT&T and Verizon, especially iPhone owners and would-be iPhone owners. The T-Mobile iPhone 5, which went on sale April 12, sells for a down payment of $100 and $20 per month (over 24 months).
The device is fully compatible with the LTE network, which will allow for some 20-mbps or better speeds for buyers lucky enough to live in a T-Mobile LTE city. T-Mobile has sold more than 500,000 iPhone 5 handsets as of May 8.
A cost study by Flannery Morgan Stanley shows that multi-iPhone families can save a considerable amount by choosing T-Mobile instead of selecting a family or shared-data plan from AT&T or Verizon. A T-Mobile plan with three iPhones saves a customer $660 or more over 24 months versus a similar plan from AT&T or Verizon, and $300 versus one from Sprint. The savings increase substantially if the customer brings his or her own iPhone.
Shoring up the 'device gap'
The iPhone is just one of many hot new devices that are now available to T-Mobile customers. Nowadays T-Mobile usually gets popular new handsets at about the same time as AT&T and Verizon do. The list includes the Google Nexus phones, the HTC One, and the Samsung Galaxy S4. T-Mobile doesn't have the same depth in Windows Phone and BlackBerry options, but that won't be a deal breaker for most people.
Also, T-Mobile allows new customers to bring any unlocked GSM-compatible smartphone to its network, a practice that AT&T is hostile towards.
Subscribers might be starting to buy into the T-Mobile story. Subscriber losses have slowed way down since last year, when the company lost 510,000 customers in the first quarter of 2012. It lost only 199,000 contract customers in the first quarter of 2013. It lost 515,000 contract customers as recently as the previous quarter.
However, Verizon Wireless added 677,000 subscribers in the quarter, and second-ranked AT&T added 296,000. T-Mobile still has a steep hill to climb.
The Metro PCS acquisition will enlarge T-Mobile's LTE reach to Atlanta, Boston, Dallas/Fort Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco, and Tampa/Sarasota. MetroPCS will contribute about 9 million prepaid subscribers to the combined company, taking T-Mobile's total U.S. wireless subscriber share from 10.5 percent to 13.3 percent.
T-Mobile will also benefit greatly from the MetroPCS spectrum it will be getting, which could give it the holdings it needs to build out a national LTE network that will rival those of AT&T and Verizon. "MetroPCS spectrum is a just-as-important part of the story; with it, T-Mobile moves from having a hit-and-miss mix of HSPA+ and LTE service to being able to roll out a 2x20MHz LTE offering that will rival any operator in the next few years," says Yankee Group analyst Rich Karpinski.
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