T-Mobile Nixes Down Payments, Ups Some Monthly Fees

NEW YORK (AP) -- T-Mobile (NYSE: TMUS  ) said Friday that it is temporarily eliminating upfront payments on new phones, but it is increasing the prices for some models through higher monthly payments.

Unlike rival carriers, T-Mobile charges the full retail price of phones, spread over two years, but reduces monthly service fees for voice, text and data. AT&T, Verizon, Sprint and others typically charge $200 or so up front for high-end phones and make up for the rest of the phone's cost through higher service fees over the life of a two-year contract.

Under a new payment plan introduced in March, T-Mobile charges a down payment for the phone and monthly installments until the device is paid off in two years. For instance, customers pay $146 up front for an iPhone 5 and $21 a month for two years for a total cost of $650. That's about the same price Apple charges when someone buys the phone without a two-year contract for use at another carrier.

In eliminating the down payment, starting Saturday, some phones will be cheaper. For instance, customers will be paying $600 overall for Samsung Electronics Co.'s Galaxy S4, compared with $630 currently. Apple's iPhone 5 will be $2 cheaper, at $648 overall.

But HTC Corp.'s One will cost $600, up $40. Other higher-priced devices include Sony Corp.'s Xperia Z and BlackBerry Ltd.'s Q10. T-Mobile said it was revising prices to reflect demand and other factors.

"Every time we have a chance to change pricing, we always make adjustments," said Mike Sievert, chief marketing officer at T-Mobile. "Some are going up. Some are going down. Each and every one is going to zero down."

The promotion follows the introduction of new upgrade plans at three of the four national wireless carriers. T-Mobile started the wave about two weeks ago with its $10-a-month Jump program. For that fee, you get insurance to cover loss and damage and the right to upgrade up to twice a year. You pay a new down payment for the new phone when you upgrade, but remaining installments on the old phone are waived. As a result, it can cost you hundreds of dollars more than keeping the same phone the entire two years.

T-Mobile's elimination of down payments is part of a limited-time promotion. T-Mobile hasn't announced an end date, but Sievert described it as a "summer promotion." That means down payments are likely to return by the time the first of the Jump participants will be eligible to upgrade, six months from when they first sign up, or next January at the earliest.

Under AT&T's Next and Verizon Wireless' Edge upgrade programs, customers pay the full retail prices for phones over 20 or 24 months, instead of the traditional way of paying just $200 up front. Unlike T-Mobile, however, neither has reduced the service fee component of phone bills, meaning customers effectively pay for the same phone twice. There's no additional monthly fee, but there's no insurance, either.

Even though Next and Edge require customers to pay more overall for phones, both waive the down payment and make T-Mobile look bad in charging it. Sievert said T-Mobile's zero-down promotion is a direct response to that perception.

The promotion applies to phones bought through T-Mobile's website, over the phone or at its retail stores. It doesn't apply to phones bought through resellers and other retailers, such as Sony's store for the Xperia Z.

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