Is This the $99.99 Deal That Saves Apple?

A new carrier could be just what Apple (NASDAQ: AAPL  ) needs to grow its market share.

Deutsche Telekom (NASDAQOTH: DTEGY  ) unit T-Mobile T-Mobile began selling the iPhone 5 over the weekend, and initial reports on Friday were encouraging. Online reports showed some T-Mobile stores busy with customers taking advantage of T-Mobile's new relationship with Apple, and that's more than what can be said for some of the new smartphones that have hit the market recently.

Healthy interest in a device released half a year ago is a welcome surprise. It's also a bit of a shock, given the flimsy value proposition of the iPhone 5 on T-Mobile. T-Mobile's advertised price of $99.99 for an entry-level iPhone 5 -- half of the retail price of the smartphone through larger carriers -- is actually just a down payment. The deal requires zero-interest financing approval, as customers are expected to pay $20 a month for the next two years. That adds up to $579.99 in capital outlays over two years, far more than the $199.99 that iPhone 5 buyers are shelling out on larger carriers. Even customers who can whittle down the initial down payment to zero through a trade-in will pay far more for the iPhone 5 itself.

T-Mobile's marketing claim is that it doesn't tie customers to annual contracts, and that's why it's not willing to subsidize the cost of a new smartphone. Is it ironic that the "Un-carrier" that disses long-term contracts is tethering customers to two-year financing deals? Yes, but let's not forget that the T-Mobile deal gets far more attractive when you compare T-Mobile's lower monthly rates with what AT&T (NYSE: T  ) , Verizon (NYSE: VZ  ) , and even Sprint Nextel (NYSE: S  ) are charging.

T-Mobile's Simple Choice Plan offering iPhone 5 owners unlimited talk, text, and Web for $50 a month is a pretty sweet deal. It's only $80 a month for two devices, and just $10 more a month for additional lines in a family plan.

Of course, there's a catch. The basic plan includes only 500 megabytes of high-speed data a month before bumping users down to serviceable but slow 2G speeds. Customers can pay $10 a month more to have 2.5 gigabytes of high-speed data a month, or $20 a month for unlimited 4G connectivity.

T-Mobile argues that this is still a superior deal. Even with someone paying $20 a month for the iPhone 5 and another $20 a month for the unlimited nationwide 4G plan, $90 a month is still less than comparable plans.

Plan

Monthly Rate

Savings

Annual Savings

AT&T Individual 5GB

$139.99

$49.99

$599.98

Verizon Share Everything 4GB

$110.00

$20.00

$240.00

Sprint Simply Everything

$109.99

$19.99

$239.88

Source: T-Mobile website.

The larger carriers will argue that there are advantages to paying hundreds more a year to be on their networks, but at least there's a value proposition to T-Mobile's offering after all.

The big winner, of course, is Apple. Having the iPhone 5 available on T-Mobile is incremental at a time when the market's worried about its ability to hang on to its market share.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 14, 2013, at 12:23 PM, GaryREM wrote:

    And of course if you really want to save, your monthly cost with AT&T or Verizon stays the same as you go past the end of the second year. At T-Mobile you no longer are paying $20 / month. Wait a few months and you've saved enough for the initial cost of a new phone.

  • Report this Comment On April 14, 2013, at 1:01 PM, ddt1345 wrote:

    I love all these headlines about Apple needing saving or some huge thing to get the company "back on track". Apple doesn't need saving. It's doing fine. What needs saving is the so-called journalistic integrity of financial bloggers. It's all about click-through rates and nothing about actual facts. Sickening. And it's not just with Apple articles, it's everything from the likes of Mötley Fool, Seeking Alpha, etc. All garbage.

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