T-Mobile (NASDAQ:TMUS) wants your business, no matter what your credit history. At least, that's the impression given by the new Smartphone Equality campaign the company launched last week.
In a blog post, T-Mobile CEO John Legere said half of Americans can't get the best smartphone and tablet deals wireless because of their poor credit, and that T-Mobile wants to change that.
To do so, the company said customers who pay their bill on time for 12 months will receive access to the best mobile device deals, including its $0 down, no interest, and no credit check offer for new smartphones and tablets.
The new offer is good for both T-Mobile's prepaid and postpaid customers, but is this really a good deal?
Yes, if you're already with T-Mobile
T-Mobile's no stranger to giving away new things -- both to keep current customers and gain new ones. In fact, the carrier offers more freebies to its subscribers than any other carrier.
But this latest Smartphone Equality deal is more likely to retain customers than to bring in new ones. Which is great, especially for people who have been paying on time and now qualify for the better deals.
On the flip side, I have a hard time believing other wireless company customers with less than stellar credit will jump to T-Mobile because they'll get a good deal a year from now. As the Consumerist noted, T-Mobile's offer only honors 12 months of on-time payments for its own customers. So if you've been paying your bill on time to Sprint (NYSE:S) for a year, T-Mobile still won't give you the $0 down, no credit check deal for new devices.
That's not a jab against T-Mobile. The carrier is trying to build more brand loyalty and is rewarding paying customers, which is never a bad thing. But it's not a big enough incentive to get Sprint customers to jump ship.
Insignificant for T-Mobile overall
It's also unlikely to bring in significant revenue for the wireless carrier.
What's particularly interesting about the timing of Smartphone Equality is that Sprint recently tightened its credit requirements for customers. On the company's fiscal second-quarter 2014 earnings call, Sprint CEO Marcelo Claure said this:
The subprime base that we added in the previous month to my appointment, you know, that is the main cause of why we have such a high involuntary churn, and we expect that that's going to remedy. That takes three to six months to remedy, and you're going to see that come down in the first quarter of 2015.
Low credit requirements led to some Sprint customers being unable to pay their bill, which naturally forced the carrier to drop them as customers. Sprint's overall churn rate (a total of voluntary and involuntary terminations was 2.18% for the fiscal second quarter, the highest of all the top four U.S. wireless carriers.
But T-Mobile is not risking its business by offering deals to customers without the best credit, because it is using a reasonable measuring stick for the best deals -- on-time payments. So while Sprint had to tighten up credit requirements to lower its high churn rates, T-Mobile should not face the same issue. All in all, Smartphone Equality is about T-Mobile offering yet one more -- albeit small -- incentive for its customers to stay with the carrier.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.