In an attempt to gain ground on its competitors, T-Mobile started selling the iPhone to its customers without asking customers to sign-up for long-term service contracts. The new marketing strategy spreads the cost of the device over a two-year period and can be paid off early if customers choose to walk away. However, some do not believe it will be enough to draw customers away from the other major carriers.
T-Mobile recently announced they would be offering the iPhone 5 for $100 up front and $20 per month over the next two years. This billing structure is being applied to other smartphones, like the Samsung Galaxy S 4 and the BlackBerry Z10. T-Mobile customers will not have long-term contracts but if they leave the company before the devices are paid off, they will have to pay the remaining balance for the phones.
The American mobile carrier is the fourth largest in the U.S. and has been losing customers to Verizon Wireless, AT&T and Sprint. Executives at T-Mobile identified that consumers shared a negative perception of its networks and were not attracted to the company without an iPhone offering. Gaining market share is important for T-Mobile if they want to avoid becoming a small niche carrier. Now that a deal has been struck with Apple, their next step is to focus on LTE data services, which they have activated in seven cities so far.
John Legere, T-Mobile’s new chief executive, is excited about the company’s move to no-contract plans. He says the plans are less expensive for consumers and eliminates the confusion of long-term contracts. Heavy data users can expect to save as much as $1,000 over a two-year period with the iPhone 5 versus the same use on AT&T’s network. The contract-free plans start at $50 a month with unlimited talk and text and 500 megabytes of data; unlimited data plans cost an additional $20 per month.
