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T-Mobile CEO confirms the iPhone and the death of phone subsidies

T-Mobile USA CEO John Legere confirmed that the iPhone will be among the Apple(s aapl) products that T-Mobile sells next year, but he said that T-Mo will sell it in a far different way than other carriers. T-Mobile is eliminating all device subsidies in 2013, requiring new customers to pay full price for their phones up front, buy it on installment or bring their own unlocked devices, Legere said speaking at corporate parent Deutsche Telekom’s Capital Markets Day in Bonn.

T-Mobile will shift entirely to its unsubsidized Value Plans, which offer customers far cheaper rates for voice and particular data. Traditionally carriers factor subsidies into their normal contracts rates – basically you’re paying a mortgage on your phone. With the Value program, T-Mobile is keeping the contract, but passing what it saves on subsidies back to consumer.

According to T-Mobile, 80 percent of its activations in the last quarter were for value plans, which leads it to believe there’s a huge demand for this kind of a model. The question is whether the iPhone breaks the model. The unlocked, unsubsidized price of the iPhone 5 is steep, between $650 to $850 depending on the model. One of the reasons the iPhone is so popular is because the operators offer big subsidies for the devices, driving the out-of-pocket costs to as low as $200.


T-Mobile will have to explain to customers that they will actually save money over the length of a two-year contract by paying a lower value plan rate. And while there would be truth in T-Mo’s claims, it’s still a hard sell to many consumers, especially with the iPhone’s huge price tag dangling in front of them.

But T-Mobile has something up its sleeve. Legere said that T-Mobile would offer the iPhone in a unique way. He implied that T-Mobile could heavily finance the device, selling it for $99 and then charging $15 to $20 a month in payments over 20 months. That kind of financing plan, however, would look very much like subsidized contract plan to the customer.

“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,” Legere said.

So we know T-Mobile is getting the iPhone, and we know it won’t be subsidized. The only remaining question is when. In the next six months T-Mobile will likely complete the reconfiguration of HSPA+ on the 1900 MHz PCS band, which will make its 3G network iPhone compatible nationwide (today only its 2G service works on the iPhone). Or Apple may want to wait for T-Mobile’s LTE network, which the carrier plans to launch in the latter half of 2013. If Apple does wait for LTE, that almost certainly means T-Mobile will have to wait for the next generation of iPhone, whatever it happens to be called.

Here’s the video of Legere’s talk along with a presentation by CTO Neville Ray. In it they reveal a bunch of interesting details about becoming America’s “Un-carrier”:

73 Responses to “T-Mobile CEO confirms the iPhone and the death of phone subsidies”

  1. Juan E. Delacruz

    I have been a LOYAL AT&T customer for let’s say over 12 years, but I would not mind jumping ship and going to T-Mobile if they get the iPhones connected If they get it to work u set the 1900MHZ band, that would mean A LOT OF AT&T customers leaving for a better deal with T-Mobile. I can also get the option for a NO CONTRACT and a cheaper monthly bill over AT&T wow! I can’t wait until mid year !

  2. T-Mo already to the installments…they did it when they were going to merge with AT&T…the installments are simply added to the bill over the contract. I bought a sidekick 4g during their unlimited everything 4g data 2 lines 100 a month and it was 15$ added for my sidekick installment per month…it was still cheaper than any other plan out i had 2 lines with unlimited everything 4g and 15 extra per phone (30) so the bill was only 130 a month…not bad at all

  3. Ashley Malagant

    Apple does not sell as well overseas. The numbers don’t support that assertion in any way whatsoever. Sony and Samsung dominate Asia completely. The iPad is the highest selling computer/consumer electronic in history? You are out of your mind. A toaster and television are also consumer electronics. An LCD watch is a computer. Typical Apple fanboy nonsense. They had a great product… 4 years ago. Have you been watching the stock slide? Wall Street is always ahead of the average moron. Apple will have to lower their margins, because they are getting absolutely DESTROYED by the the cheap Android devices, and investors know that. No informed person is going to pay $700 for an iPad, when the competition charges half that… and most people will settle for the ones under $200. Apple is about to be crushed by the weight of unrealistic investor expectations. It’s already started, and it will accelerate after the holiday sales numbers come out next year.

  4. Atlanta Owner

    In other countries, it’s the norm to buy your own phone and use prepaid services. Only in a handful of countries are two year “contracts” pushed so heavily, and we’re the biggest pusher of them all. I would welcome this type of model to shake things up a bit.

    It’s also important to note that not everyone has an addict’s desire to own “the best” smart phone and the newest on the market. As an example, you can buy the Samsung Galaxy S 2 (last year’s model) for around $329 or so via a couple of prepaid services right now – a very nice phone even by today’s standards, but you can get slightly lesser Android models for as little as $99-$179, too. The iPhone 4 and 4s models are following with price reductions as well. So it’s not necessary to shell out $650-$850 for a “good” smart phone – they already exist and at far lower prices so long as you don’t have to have something that just hit the market 5 minutes ago. Their plan to finance the phones are a good one, too – so long as they market the info so as to fully explain to the sometimes dim public exactly what they are paying for, and why.

    People are getting tired of shelling out $100-$120 on average per person per month for cell service. This is why the prepaid companies have seen such a huge increase in sales in the last couple of years. It’s nice to see a full service instead of a discount Indian-based company step up and start to offer innovative plans. I applaud them.