T-Mobile US Inc. Is Giving Away Apple's Best iPhone

T-Mobile (NYSE: TMUS  ) is the nation's fastest-growing carrier. Last quarter, it added 1.3 million monthly subscribers -- more than both of the largest U.S. carriers combined. Yet, despite its growth, T-Mobile remains as aggressive as ever.

Its latest attempt to attract subscribers involves giving away Apple's (NASDAQ: AAPL  )  best iPhone, the 5S. Prospective T-Mobile customers can, for period of seven days, try Apple's latest smartphone for free.

Ultimately, the program -- known as Test Drive -- could benefit both companies as it allows would-be smartphone buyers to try out the products of both companies.

Test driving the T-Mobile network
In T-Mobile's case, it centers around the quality of its network. Historically, T-Mobile's network hasn't been as fast or as reliable as those of its larger competitors. Although T-Mobile generally charges less than its competition, subscribers that are mostly happy with their current service may be afraid to switch.

T-Mobile's network may still be lacking in rural areas, but its 4G LTE coverage has improved markedly in recent months. Last September, T-Mobile boasted that its 4G LTE network now covers over 180 million Americans, and today, it claims to cover more than 210 million people. T-Mobile continues to upgrade its network, and it promises it will have the majority of its 2G coverage upgraded to 4G LTE by the middle of next year.

In terms of speed, T-Mobile's 4G LTE stacks up favorably with its larger competitors -- in fact, it may even be better. Research firm OpenSignal found T-Mobile's 4G LTE download speed to be faster than its larger rivals, and its its network latency to be competitive.

Apple's T-Mobile problem
T-Mobile is partnering with Apple for the promotion, and it isn't surprising that Apple would be on board. As a percentage of T-Mobile's smartphone sales, Apple's iPhone hasn't done as well on T-Mobile as it has on the other major U.S. carriers.

For whatever reason, T-Mobile's subscribers seem to favor handsets made by Apple's competitors -- T-Mobile's Test Drive program could be a way to change that.

If a would-be subscriber receives Apple's iPhone 5S during their test drive phase, it seems intuitive that they would likely to keep it -- assuming they choose to switch to T-Mobile's network. But even if they don't, getting exposed to Apple's device and its content ecosystem could serve as a powerful pull, converting customers to Apple's smartphone.

And once they've purchased their first iPhone, they'll likely be back for more -- buyers of Apple's handsets are known to be fiercely loyal. According to research firm WDS, 76% of current iPhone owners plan to buy another handset from Apple when it comes time to upgrade.

It could backfire
Of course, it should be noted that this policy has the potential to backfire. A prospective buyer that test drives T-Mobile's network may find that it doesn't suit his needs; an Android user, after testing Apple's iPhone 5S, may conclude that she simply doesn't care for Apple's operating system or its hardware choices.

Nevertheless, it appears to be a relatively low-risk way for both companies to create new customers. Whether it results in additional T-Mobile subscribers, or more iPhone buyers, however, still remains to be seen.

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  • Report this Comment On June 26, 2014, at 9:05 AM, VernDozier wrote:

    Well, it is whatever Ann Carlson, SVP of Human Resources at T-Mobile can do. As SVP of Sprint, she'll make sure no one can ever come back.

    I heard from her ex that she's quite an empowered woman. T-Mobile staff should appreciate her work in ensuring her head is on a plate.

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Sam Mattera

Sam has a love of all things finance. He writes about tech stocks and consumer goods.

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