T-Mobile to kill smartphone subsidies in 2013, offer value plans only

By on December 7, 2012, 11:30 AM

In addition to yesterday's news that they'll be selling Apple products starting in 2013, T-Mobile also announced it is shifting to an unsubsidized "Value Plan" system exclusively. The company says customers will be able to either pay full price for cell phones up front, make an initial ~$99 payment and finance the rest with a number of $15 to $20 monthly payments that are explicitly spelled out on their bill, or bring in their own unlocked device.

About 80% of T-Mobile's activations are already for their current Value Plans, which offer price savings on customers' monthly bills if they purchase a phone outright or bring their own device to T-Mobile's network. It remains to be seen what kind of savings they're prepared to offer compared to comparable plans from rivals offering subsidized phones.

If they can offer direct financing on flagship handset like the iPhone 5 and Galaxy S3 the company will effectively workaround a barrier that less expensive regional or bargain prepaid service providers face -- that big one-time hit for the full price of a phone. In practice, that extra $15-$20 tacked on your bill will likely work out to about the same you pay at another carrier with a subsidized phone, only there's more transparency in T-Mobile's approach and you'd actually stop paying that fee once you have effectively met the phone's cost.

The decision to ditch subsidies will cut upfront costs for T-Mobile. Although value plans will earn them less revenue, the company hopes to make up the difference in customer volume, loyalty, and possibly plan upsales.

Besides the potential longer-term savings for customers, T-Mobile hopes to woo customers frustrated with restrictions on upgrades in longer-term contracts. The company says customers would be able to trade in their phone for 'fair value' at any time if they wanted to upgrade to a new device.




User Comments: 8

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Tygerstrike said:

Ladies and Gentlemen.....Witness the US death of Tmoble!!!! There are way way too many cheap ppl who only get cell service because they can get free phones. Now that those phones wont be free, Tmoble is going to lose customers to the carriers that offer free phones.

1 person liked this | corrosive23 said:

Ladies and Gentlemen.....Witness the US death of Tmoble!!!! There are way way too many cheap ppl who only get cell service because they can get free phones. Now that those phones wont be free, Tmoble is going to lose customers to the carriers that offer free phones.

Did you miss this part?

"About 80% of T-Mobile's activations are already for their current Value Plans"

Jim$ter said:

Wrong Tigerstrikee....Not death but growth. A lot of people are realizing they can save money in the long if they pay for the phone upfront. Verizon/AT&T...sure you can get a free phone...but you pay more than double in Monthly fee's forever! People need to look at the bigger picture.

psycros psycros said:

Ladies and Gentlemen.....Witness the US death of Tmoble!!!! There are way way too many cheap ppl who only get cell service because they can get free phones. Now that those phones wont be free, Tmoble is going to lose customers to the carriers that offer free phones.

Smartphones are now the most common wireless devices in the US, and the overwhelming majority of them are iPhones. No carrier I know of offers a free current or last-gen iPhone with either new contracts or upgrades. This is the smartest move T-Mo could make. Subsidized devices are an outdated concept that's already been largely abandoned in Europe. Within a few years subsidies will rare outside of the developing world. T-Mobile is likely to gain customers from this move.

inventix1136 said:

I have to agree that they will get market share because of it.

What other carrier can you go to that allows you to bring your own device, put in SIM card, get prepaid as you go, which can be had for $9/month if you don't use too many minutes and don't need data -- and when you need data, just change the plan on the phone to get data/unlimites txt/unlimited mgs for $2 and then when you are done with data needs, change back to prepaid as you go. And this is for a Galaxy Samsung SII...

P.S. Had the setting on prepaid on the go, was at museum but the queue to buy tickets was a mile long but they had online purchasing with electronic kiosks pickup so I changed my plan to the $2/day plan at the museum directly on phone via T-mobile app, purchased the tickets, and on end of the day switched back to prepaid minutes only. Total price of usage for entire month with that one day of data and my low minutes usages - $13...

MilwaukeeMike said:

I agree, I think it's a great idea. Never hurts to have more than one price model. Right now carriers have to pay for part of the phone, but if T-mobile offers financing on their phones, they will actually make money on the sale. You'll be paying $15/month, but most likely it's going to be setup as a loan that you're paying off, and it won't be at 0% interest.

People will jump at the opportunity to get high end phones for 'free' and pay for them monthly. The poison pill of course is while you don't have a contract keeping you with T-mobile, you will be sending them payments until your phone is paid off, even if you take your unlocked phone over to another carrier.

Guest said:

Just an FYI no interest is charged on the loan and if you leave T-Mobile the whole loan becomes due in last bill.

Guest said:

Sams Club - This week selling Samsung S 3 Phones for 96 cents. this does not cover the Value plan customers. What? This only covers the Family plan that they say they are getting rid of.

The rest of us feel abandoned, hung out to dry, you get the feeling. Phones are too expensive, and I will probably hang on to my original 4G My touch until it turns to dust. My son has an old text button phone, same story folks. If T Mobile will play favorites with "Oh we cannot give you that deal, you have the wrong plan" I say that sucks.

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