T-Mobile to eliminate handset subsidies ahead of iPhone launch

By , Dec 8, 2012

On Thursday, Deutsche Telekom announced that T-Mobile USA had entered into an agreement with Apple to bring products to market next year. CEO John Legere confirmed the news while speaking at a conference this week, saying that T-Mobile will indeed be carrying the iPhone in 2013, and it will be offering it in a “different” way…

What does he mean by different? Well assumedly, it has something to do with the fact that T-Mobile also recently announced that it will be eliminating handset subsidies by the end of the year. That means that instead of paying $99 or $199, customers will likely be paying full price — so more like $600 — for the iPhone and other devices.

GigaOM has more on Legere’s comments:

“What was missing? A certain number of customers wouldn’t come to the store if we didn’t have the iPhone,” Legere said. “We worked very, very hard for a deal that made sense for us…

…When this device 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.”

Traditionally, carriers factor handset subsidies into their plans and other monthly fees. That’s why you sign a contract to get the lower price on a phone, and why there’s an early termination fee if you cancel — they have to make sure they make their money back on the device. T-Mobile, however, is moving to a completely different model.

The carrier will shift entirely to its unsubsidized Value Plans, which offer customers far cheaper monthly rates for voice and, particularly, data plans. With its new Value program, T-Mobile is keeping the contract, but passing the money it saves from not subsidizing handsets onto its subscribers. It’s an interesting strategy, but will it work?

It’s hard to tell at this point. But regardless, finally cementing an iPhone deal can’t hurt. T-Mobile will be the last of the four major carriers in the US to offer Apple’s popular handset — a device that it blamed for much of its recent loss of some half a million subscribers.

What do you think, would you pay more for an iPhone up front if it meant cheaper monthly fees?

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  • http://www.facebook.com/JLJames5880 Jonathan L. James

    Not many people will pay full price for a phone. 600 bucks. No I don’t think so. That’s not gonna work.

    • imot65

      This is the way it works in Europe as far as I know.

      • Falk M.

        No, not really.
        What makes you think that?

    • Jerry

      I payed 950$ for the 5 64gb :/

      • http://twitter.com/AmpxMC Amp

        I payed $850 to get a 64gb with Verizon.

      • Jerry

        After taxes with AT&T it reaches the 9s

      • Falk M.

        You bought it in the wrong state then buddy! :P
        (or didn’t you have a choice?)

      • http://twitter.com/AmpxMC Amp

        I’m sure, I had AT&T. I got tired of thier crap.

    • JWu

      That is certainly true when the monthly plan rate is high. I think what T-Mobile will do is have people pay a small down payment for the phone. Then, each month a portion of the bill is for the cost of the phone. This is usually $15-20 and is paid until the phone is paid off. In the end, the total cost would be similar to another carrier. This benefits customers if they have their own device and T-Mobile because T-Mobile does not have to sign a huge contract with Apple.

    • http://www.facebook.com/beyleriang George Beylerian

      Actually, I paid full price for my iPhone and I don’t make a lot of money. It’s worth paying full price because in reality, with the two year contract you’re paying well over one thousand dollars for your iPhone. I pay 50 dollars a month on a plan I actually fully use.

  • http://twitter.com/drewstone2 drewstone

    id rather buy a unlocked one from apple and pay $50 unlimited everything a month on AT&T gophone plan since i travel overseas often. Or, just pay for a unlock service for about $10 to unlock a older iphone. i had a AT&T plan and was paying about $80/month. save $360/year makes sense to me. just my $0.02

  • iBanks

    Sounds like when I bought the 8gig Original iPhone… Full retail was the way it was even with contract.

    • http://www.facebook.com/beyleriang George Beylerian

      I remember that! You could actually get the iPhone 2G on a pre paid plan, that’s what my mother did. By the way, the iPhone 2G still works perfect.

      • http://twitter.com/therealjdizzle Jason Masters

        It may work but none of the apps will thanks to constant updates.

      • Falk M.

        Not thanks to the updates, but thanks to Apple for deprecating OS functions every year and even disallowing developers to further support old models.
        Example: You may not support the iPhone 3G anymore in your updates.
        The big problem is that you might be fine when updating the apps via the iPhone, but when you restore your phone and try to reinstall the apps from the iTunes library (which of course, you always kept the apps updated in, because you’re a tidy man liking the update counter to be gone) you’re screwed.
        Hope you still got some old ipa’s flying around ;)

        Starting next year I’ll do yearly or quarterly backups of my ipa’s, to prevent my phones becoming useless in future when I want to use them for retro reasons. :D

  • Bailey

    That’s how it works for us in Japan. We pay full price and way too much for the plan. It’s ridiculous but they fly off the shelves here.

  • http://www.facebook.com/brandon.higgins.12 Brandon Higgins

    If it comes unlocked then sure ill throw down the money. Otherwise no.

    • http://www.facebook.com/beyleriang George Beylerian

      It comes unlocked man.

  • http://twitter.com/setaneka Bisikan Syaiton

    I think subsidies only work in 3rd world contries, guess I’m wrong.

  • http://twitter.com/therealjdizzle Jason Masters

    This question has been posed before here has it not?
    When virgin rolled out their prepaid iPhones.
    Short memory IDB very short memory indeed.