T-Mobile's Legere Kicks Butt. Will It Matter?

T-Mobile has been mentioned more lately than any time since the FCC and Department of Justice pulled the company from the wide-open merger maw of AT&T-Rex (NYSE: T  ) last year.

That mega merger not-to-be put a few billion dollars of penalty fees in T-Mobile's treasury, but the question of "What next?" for the Deutsche Telekom subsidiary still lingered... along with something else: the chip on T-Mobile's shoulder from being the U.S.' No. 4 mobile carrier (after No. 3 Sprint Nextel (NYSE: S  ) , no less).

Here's T-Mobile CEO John Legere's no-holds-barred assessment of the quality of his company's former altar-mate at this January's CES:

Anybody here from New York? Any of you use AT&T? Any of you that use them, are you happy? Of course not, the network's crap.

And that was just the beginning of the colorful language, folks. He got more explicit yesterday at the T-Mobile event in NYC staged to kick off the carrier's LTE network, confirm getting the iPhone, and announce its new "Uncarrier" plans. Legere derided the postpaid contract model pushed by Verizon (NYSE: VZ  ) , AT&T, and Sprint.

"Carriers are really nice to you ... once every 23 months," he added.

A contract is a contract is a contract
But when consumers put the Uncarrier to the sniff test, they may come away with the same assessment of the plan that Legere has of the other carriers' plans.

The current two-year commitment consumers must make at the other three first-tier U.S. wireless carriers gives them a phone at a much lower cost than what the phone's retail price would be. Sometimes the phone even comes free.

A base iPhone 5's retail price of $649 falls to $199 when coupled to a two-year contract from AT&T, Verizon, and Sprint. Of course, the $450 price difference will be made up for by the 24 monthly plan payments to come.

The T-Mobile plan, on the other hand, does not subsidize the cost of the phone. An iPhone 5, which T-Mobile will begin offering on April 12, will cost the full retail price. However, if customers prefer not to -- or cannot afford to -- pay full price, they will have the option of buying that phone over time.

For example, the iPhone 5 from T-Mobile will cost $580 -- without a contract, of course, because there are no more contracts at T-Mobile. But, one can get that same phone by putting $100 down and committing to two years' worth of $20 monthly phone payments .

But won't the customer have to sign a two-year contract stipulating the 24 $20 payments? Of course they will. So is there really a difference between T-Mobile and the other carriers? In reality, no.

And who is eating/subsidizing the $70 difference between Apple's (NASDAQ: AAPL  ) retail price for that phone and the price charged by T-Mobile? It looks like T-Mobile will have to choke down the difference.

In the end, I think, any subscriber increase for T-Mobile will have to come from quality of service coupled with price savings -- not from any contract Legere-demain. I think the wireless giants and Sprint will be safe for now.

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  • Report this Comment On March 27, 2013, at 10:01 PM, marv08 wrote:

    "In the end, I think, any subscriber increase for T-Mobile will have to come from quality of service coupled with price savings -- not from any contract Legere-demain."

    Yes, true. But starting with "HD Voice", a very noticeable improvement in call quality, unlocked phones and pretty transparent and easy-to-"get" plans... That might just be what they are doing. (Yes, far too early to tell, admitted, but it seems the will is there...)

    Compared to AT&T, which since 2007 is always the last to support anything Apple has added to the iPhone (from tethering to FaceTime), while even the fifth carrier in Northeast Bangladesh had no problem doing it from day one... they might have a point.

  • Report this Comment On March 28, 2013, at 4:54 PM, makelvin wrote:

    "...But won't the customer have to sign a two-year contract stipulating the 24 $20 payments? Of course they will. So is there really a difference between T-Mobile and the other carriers? In reality, no..."

    I am not sure simply paying what you actually owe is considered a contract. Unlike other carriers, you do not have to pay any additional penalty for getting out early; you just pay the remaining balance of what you owe. Consider the fact that you paid $99 upfront and even with the additional $20 monthly installment, the T-Mobile plan still comes in lower than ATT and Verizon. Besides the total phone cost is $70 less than the retail price, you also do not have to pay any interest at all for the phone over the 2 year installment. This is without a doubt a better deal.

    Another thing to keep in mind is that once the full payment is made, your monthly bill will be $20 lower every month. With ATT and Verizon, even if you do not upgrade after 2 years, they will continue to charge you the same voice and data rate as if you still have to make the phone subsidy cost. Therefore, if you do not wish to upgrade after 2 years, you will look like a fool for continuing to pay the ridiculous high fee. The fact is there are a few people I know that did exactly that and I am sure ATT and Verizon must have made quite a few millions with people like that.

    The T-Mobile plan is more transparent and fair. I think it will affect the future upgrade of their phone as it will not pressure them to do so; unlike ATT and Verizon, if you do not upgrade after the contract is over, you are a fool. The real problem with T-Mobile is their coverage, call quality and bandwidth. They seem to have made some recent improvements, but I will have to wait and see.

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