Please ensure Javascript is enabled for purposes of website accessibility

How Does T-Mobile's New "Simple Choice" Plan Compare to the Competition?

By Daniel B. Kline - Dec 13, 2014 at 3:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Un-Carrier's new offer is easy to understand, but is it the best value?

T-Mobile(TMUS 0.01%)CEO John Legere has once gain taken a shot at his rivals, unveiling a new plan which offers customers two lines with unlimited calls, texts, and 4G LTE data for $100 a month. Additional lines -- up to eight more -- cost $40 each and also offer unlimited services.

The plan -- dubbed "Simple Choice" -- is meant to save subscribers the hassle of having to track data usage, while also offering a low overall price point. T-Mobile offers it as a way to help consumers cut through what the company sees as confusing plans, pricing schemes, and gimmicks from rivals AT&T(T -1.91%), Verizon(VZ -0.91%), and Sprint(S)

"People are saying loud and clear that they hate the confusion and complexity of the carriers' shared data plans, and they should," said Legere in a press release. "These plans are purpose-built to do one thing – take money from your pocket and put it into theirs. They threaten you with punishing overage penalties unless you police your own family's data usage or up your data bucket and spend more every month." 

This announcement is yet another part of T-Mobile's strategy to win customers from industry leaders, AT&T and Verizon, while also keeping potential defectors away from Sprint. The plan trumps AT&T and Verizon's best offers as those carriers are not competing on price. Here is a look at how Simple Choice measures up against Sprint's "Cut Your Bill in Half" campaign.

T-Mobile vs Sprint
T-Mobile's offer is clearly the most straightforward. The pricing applies no matter what phone you choose, and as is the case with all T-Mobile plans, phones are either purchased up front or financed over 24 months. That gives customers leeway to choose whatever device best fits their taste and budget.

When it comes to customers looking for a top-tier phone at the best price, Sprint can offer a cheaper monthly bill in some situations but probably not the better overall value. The company has a $50 unlimited plan but only with Apple's iPhone (non-iPhone users pay $60 for a single unlimited line). Sprint also offers its "iPhone for Life" lease plan, which charges customers $18 a month for the use of an iPhone 6 over a 30-month lease period.

That brings the cost of having two iPhones, each with a separate, unlimited plan to $136 a month with the major caveat that you have to return the phones at the end of your lease.

Using Simple Choice, T-Mobile users would pay $100 for two lines, plus $27.08 a month for each iPhone. That brings the total monthly cost to $154.16, though you would own the phones after 24 months. And that is no small distinction as owning the device means you can also sell it. Apple phones have a particularly strong resale value -- Gazelle.com, for example, will pay $130 for a Sprint 16 GB iPhone 5S in good condition. 

You can lower the monthly cost by choosing other high-end phones such as the Samsung Galaxy S5 ($21.23 a month). Or you could choose an inexpensive mid-level device such as Microsoft's Nokia Lumia 635 ($5.41 a month). If you select two Lumia 635s, your monthly bill would be just $110.82.

Sprint also offers comparable, mid-level devices such as the LG G3 Vigor, which can be had for $10 a month on a 24-month finance plan. However, the total bill of $140 for two lines is still higher than the Lumia 635 option through T-Mobile..

The numbers also favor T-Mobile when you start adding lines. A family of three which opts for Sprint's $50 iPhone plan will pay $204 a month -- $150 for three lines and $54 for three devices. The same family using T-Mobile would pay $140 for the lines and $81.24 for the phones for a total of $221.24 but replace two of those iPhones with Nokia 635's, and the phone charge drops to $37.90 a month for a total cost of $177.90.  Make the same replacement with two G3 Vigors, and the Sprint deal still comes in at $208.

Sprint offers a better deal if you're willing to lease the phones, but T-Mobile offers more combinations for cheaper overall plans -- especially when looking at devices other than the iPhone. 

Potential unlimited plan monthly bills.

CarrierLinesLine cost/month:PhonesPhone cost month:Total: 
Sprint 2 $100 iPhone 6 $36* $136
T-Mobile 2 $100 iPhone 6 $54.15 $154.16
Sprint 4 $200 iPhone 6 $72* $272
T-Mobile 4 $180 iPhone 6 $108.30 $288.40
Sprint 4 $220 2 iPhone 6/2 LG G3 Vigor $56* $276
T-Mobile 4 $180 2 iPhone 6/2 Lumia 635 $64.98 $244.98
Sprint 4 $240 LG G3 Vigor $40 $280
T-Mobile 4 $180 Lumia 635 $21.64 $201.64

*All prices are as of 12/11/2014 and are subject to change.*iPhones are on a 30 month lease, so you do not own the phone

It's about more than just cost
While both companies rank at the bottom of RootMetrics survey of wireless networks for the first half of 2014, T-Mobile does score ahead of Sprint by a small margin (71.5 for T-Mobile versus 69.6 for Sprint). That gives it a slight edge, but the reality is that T-Mobile may be onto something when it says simplicity is best.

It's technically possible to get a better value on Sprint, but that deal is only available with the iPhone 6. Switch to nearly any other device, and T-Mobile comes out on top. Overall, the Simple Choice plan is both easy to understand and the best value for most customers. 

Legere and his company have continued to drive prices down while offering complete transparency. That's good for consumers and may ultimately force Sprint to counter with another special offer.

Daniel Kline owns shares of Apple and Microsoft. The Motley Fool recommends Apple and Verizon Communications, Inc.. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sprint Corporation Stock Quote
Sprint Corporation
S
T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
TMUS
$144.58 (0.01%) $0.02
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$44.54 (-0.91%) $0.41
AT&T Inc. Stock Quote
AT&T Inc.
T
$18.00 (-1.91%) $0.35
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$280.32 (-0.92%) $-2.59
Apple Inc. Stock Quote
Apple Inc.
AAPL
$164.87 (-0.29%) $0.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.