Will T-Mobile Destroy Telecom Sector Growth?

In March, T-Mobile (NYSE: TMUS  ) rocked the telecom sector and became the first major wireless carrier to do away with smartphone subsidies, even though it did so under the veil of freeing customers from the burden of contracts. Since the announcement, rumors have begun to circulate that Verizon (NYSE: VZ  ) is considering following suit. If Verizon drops subsidies, it's likely that AT&T (NYSE: T  ) will do so, as well, and the rest of the telecom sector could follow suit.

In the video below, Fool.com contributor Doug Ehrman discusses how the end of subsidies will impact the telecom sector, specifically companies like Apple (NASDAQ: AAPL  ) , which rely on a rapid upgrade cycle to push unit sales.

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  • Report this Comment On June 29, 2013, at 11:44 AM, ScottAtlanta wrote:

    Thanks for insights.

    To the extent that nearly all computing shifts to one device vs. two or three with associated "data" subscriptions....there may be room for that particular device to charge more. I think we see this already with the near end of residential land line subs. and with cable cos. lowering their rates to retain customers (in markets with at least one other competitor..) -- as people shift their dollars to other tech and paid access models (e.g., netflix).

    You'll need one small(er) device that can fit in your pocket that links to the internet (I like my Galaxy Note). If you want a larger screen you can link it to screen at home (what used to be the TV -- now it's just V for viewing or perhaps VS for Viewing Screen/Surface) and a keyboard/gaming console at home, etc. One device, one fee for internet access (streaming music, TV, etc.).

    I'm not saying anything new....but just to show how with convergence onto one device and data plan....there is room perhaps to charge more -- even though I find this anathema from the consumer's perspective.

    The company might advertise/educate the public on this model to justify the higher costs and facilitate the transformation of societal interface with tech....

  • Report this Comment On June 29, 2013, at 10:53 PM, spinod wrote:

    Phones cost 500+ dollars without the contracts. So they are still winning.....

  • Report this Comment On June 30, 2013, at 1:49 PM, troyd0879 wrote:

    This is not a huge win for the consumer in my opinion.... T-mobile has done away with the subsidy, but didn't necessarily reduce the price of the plan to reflect the absence of the subsidy... So now they are basically getting the subsidy and the full price of the phone.. Before you start telling me I am wrong, I have been with T-mobile since 2002 and my plan went up about $5/month to change over to a non-subsidized plan comparable to the subsidized plan I had before..

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