NEW YORK (AP) — T-Mobile USA has announced it will start offering the iPhone on April 12, filling what its CEO said was “a huge void” in its phone lineup.
T-Mobile, the fourth-largest of the national U.S. phone companies, has been losing customers to the bigger companies, which all sell the iPhone.
The company will charge $100 up front for the iPhone 5, then another $20 per month for two years. That’s on top of service fees for voice, text and data that start at $50 per month. Total monthly cost starts at $70 per month, substantially below prices offered by bigger companies.
Here are some questions and answers about the revamp.
Q: How does this help me?
A: It makes it easier to understand the cost of buying a phone and canceling service. Basically, you know you’ll be paying off the phone over two years, even if you leave T-Mobile. There’s no early termination fee, and you don’t have to wait to be eligible for a new phone at a discounted price. Also, once you’ve paid off your phone, your monthly bill declines.
Q: Is it any cheaper?
A: Sort of. T-Mobile’s service plans are relatively cheap, and at least in the case of the iPhone, it’s not charging that much for the phone. The full price for the 16-gigabyte iPhone 5 is $580, compared with $650 at the other carriers. On the installment plan, you pay $100 down and $20 per month for two years. T-Mobile has been undercutting the bigger carriers for a while, and this is a continuation of that strategy.
Q: Do I still need to pass a credit check?
A: Yes, if you want to get the phone on an installment plan. If you fail, you have to pay the full price up front. You also need to pay in advance for monthly service — the so-called prepaid option — while those who pass a credit check can sign up for monthly billing.
Q: Do I pay interest on the installment plan?
A: No, T-Mobile is basically extending interest-free financing on phones.
Q: Can I buy a phone on an installment plan and move it over to another carrier?
A: No, the phones are “locked” to T-Mobile until you pay them off. You can pay off the phone early with no penalty if you like.
Q: What kind of data plans do they offer?
A: T-Mobile likes to say that all of its plans offer “unlimited” data, but they’ll slow down drastically once your phone hits a certain level of usage in its billing cycle. For the basic, $50-per-month service plan, that limit is at 500 megabytes — enough for a frugal smartphone user. For another $10 per month, they give you 2.5 gigabytes. If you add $20 instead, you get true unlimited data service.
Q: Sounds great. What’s the downside?
A: T-Mobile’s data network coverage is poorer in rural areas. It’s the last of the four major carriers to build out an LTE network, which offers higher data
capacities and speeds. T-Mobile also doesn’t have access to lower frequency bands that help Verizon and AT&T with indoor coverage.
T-Mobile’s network has, until recently, not been able to offer high-speed data service to iPhones. It’s now able to deliver high-speed data to iPhones in some cities, and it has lured over 2.1 million off-contract AT&T iPhones, executives said Tuesday.
The company also announced that it is firing up an even faster data network, based on so-called “LTE” technology, in Baltimore, Houston, Kansas City, Las Vegas, Phoenix, San Jose, Calif., and Washington. Unofficially, the network is also active here and there in New York, as demonstrated at the event. By the end of the year, T-Mobile says it will be available where two-thirds of the nation’s population lives. The iPhone 5 can access the LTE network for faster data downloads.
T-Mobile is the last of the four major carriers to launch an LTE network, but already has a relatively fast “4G” network. It’s been hamstrung by a lack of space on the airwaves, but gained some room last year from AT&T as part the compensation for a failed buyout attempt.
T-Mobile also said it will start selling the Samsung Galaxy S 4 on or around May 1. That’s the successor to the Galaxy S III, which has been the chief competitor to the iPhone.
The announcement comes just days after T-Mobile ditched its conventional contract-based plans in favor of selling phones on an installment basis. It’s separating the cost of the phone from the service, and when a phone is paid off, usually after two years, the monthly fee for the phone disappears from the billing statement.
On traditional contract-based plans still used by the other carriers, the buyer is deemed to have “paid off’” the phone after a certain period, at which point the customer becomes eligible for a new, subsidized phone. The monthly payments, however, don’t decline if the customer keeps the old phone. There’s no service contract, so customers are free to jump from T-Mobile to another carrier at any point, but they’ll still be paying off their T-Mobile phone in monthly installments.
T-Mobile is positioning the change as a radical departure from industry practices, and is basing a new advertising campaign on being the “Uncarrier.”
“T-Mobile realizes that they have to change the rules of the game, because under the current rules, they’re losing, and they’re going to continue to lose,” said telecommunications analyst Roger Entner at Recon Analytics. He’s skeptical that the plans, alone, can change its fortunes.
“Even if they’re $5 cheaper, will that be enough? They’re already charging a significant discount to Verizon and AT&T, and they’re losing customers,” Entner said.