Earlier today T-Mobile announced that it will finally start selling Apple products in 2013. As the last major U.S. carrier to not offer Apple’s beloved iPhone, it’s about time T-Mobile joined the cool kids’ table.
T-Mobile CEO John Legere has promised that buying the iPhone on his network will be “dramatically different” due to the carrier’s decision to abandon subsidized wireless contracts altogether. This is a huge move that could either make or break T-Mobile, and it will hopefully make buying smartphones like the iPhone a better experience for U.S. customers.
While speaking at a Deutsche Telekom conference, T-Mobile’s John Legere said, “When this device [iPhone] rolls out, I can only tell you it will be a dramatically different experience. And I can only tell you that of all the reports that have been written about what’s going to happen when it comes out, they’re all wrong.”
What is Legere referring to? T-Mobile will be doing away with the phone subsidies that typically come with two-year contracts. You see, when you buy the newest iPhone for $200 on the likes of AT&T or Verizon, you’re actually paying a hidden mortgage via your monthly bill. Without a two-year contract, the base version of the iPhone 5 costs $650. You pay that much and more over the course of two years when you buy the device subsidized at $200.
We’ve done the math on going with a prepaid carrier like Virgin for the iPhone, and you save hundreds of dollars over the course of a couple years. But for most people, it’s still about immediate savings when buying a smartphone, not longterm financial advantages. T-Mobile is trying to change the average customer’s perception by killing off subsidizes completely.
Come 2013, T-Mobile will only offer “Value” plans, meaning lower base and data/voice pricing. For example, Legere proposed that T-Mobile customers would be able to buy “the most iconic device in the world” (obviously the iPhone) and only pay $99 up front for the newest model. Data and voice would be cheaper, but T-Mobile would add an extra $15-$20 per month fee that would last for about 20 months until the iPhone is paid off. It sounds more like a layaway and less like a mortgage.
T-Mobile’s current Value plans give lower monthly rates in exchange for buying the device full price. When you choose to buy unsubsidized, the device is unlocked out of the box, meaning you can use any GSM SIM card you please. By the time the next iPhone rolls around, T-Mobile could very well be the cheapest option of the “big four” (AT&T, Verizon and Sprint).
“You love your iPhone, you hate AT&T. I want you to get used to that tone, because that’s how we are going to play,” said Legere. Good move, T-Mobile.