T-Mobile's New Game
So T-Mobile today announced they are changing things up in the mobile world. They are dropping contracts (for service) and making people buy phones out right (sort of). Here are the real details of the programs. Be warned, my math is based on unlimited everything plans. There are other options, which bring down the price, but let’s be real and assume we are going to abuse the system like I do.
The big deal is there are no more contracts with T-Mobile. You are free to leave at anytime*. Yes, there is a * there, and here is why. Your shiny new phone, is locked to their network until you pay it off. At full price. So the bonus is, you are no longer going to sign a two year contract for a $0 phone for two years. The downside is you are paying for the phone at full market rate.
The salesmen of T-Mobile were granted a gift though, almost all high end phones are now affordable*. That damn * again. This time it is because the advertised price for a phone will be a down payment. This isn’t a new trick for T-Mobile, but it is one people are going to lament, I think. Basically you can get a shiny new iPhone5, or HTC One, or Samsung Galaxy S4 for only $99. That is a sweet deal. Oh wait, that is right, there is a $20 (YMMV) monthly fee for 2 years. Oh… so you are stuck with a phone… at full price, that only works with T-Mobile until paid off… over two years. Do you see what they did? They didn’t lock you into their service with a contract on the service, they locked you in with a contract on the phone. Sneaky. People will fall for it.
Alas, there is more. So… let’s assume you are paying the $99 down, and the $20/month for 24 months for a total of $579 for your new phone. They much be cutting the plans to something reasonable, right? Not really. Let’s keep in mind the MVNOs on T-Mobiles own network are charging $50/mo for unlimited everything (talk, text and data). To have T-Mobile proper, you are looking to pay $70 (for a single line) or $60/ea for a family plan of 2 lines ($120/mo).
Let’s add up the savings!
$579 for the phone ($99 down, $20 for 24 months)
$1,680 in service (assuming you don’t pay off your phone early and bounce)
Total $2,259 for two years.
$1158 ($198 down, $40 for 24 months)
$2880 in service (assuming you don’t pay off your phone early and bounce)
Total $4,038 for two years.
Lets’s compare that to SimpleMobile (a T-Mobile MVNO) with a outright purchase of a LG Nexus 4
$349 (16GB from Google Play, not including sales tax)
$1,200 ($50/mo for 24 months)
Total $1549 + Sales Tax or two years.
2 lines would be $3,098
So for single folks that is a savings of $710, and families save $940.
Obviously the reason T-Mobile will continue to win here is the payment plans on phones. Because you will be paying less up front, and more over time. The big deal is the instant gratification.
Will other carriers come over to the “Uncarrier” side? Probably not. T-Mobile is taking a huge risk, one that other companies have actually told T-Mobile they tried, and failed at.
Where T-Mobile customers might win is with people who are good at spending wisely. Get a phone now for $99 and pay it off faster and bail on the network for an MVNO. I could see that being a killer market. In fact… maybe it is time to get into the game of selling LG Nexus 4s on payment plans.