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T-Mobile Turnaround: iPhone Is In, Contracts Are OutBy Adam Dickter
Posted: December 8, 2012 9:02am PST
Struggling carrier T-Mobile USA is hoping 2013 will be a banner year as it gears up to merge with MetroPCS (if approved by the government), tosses out contract plans in favor of prepaid and gets ready to sell Apple's iPhone. It remains to be seen, though, if the fourth-place carrier can gain ground against its larger rivals and make it worthwhile for parent company Deutsche Telekom to stay in the important but highly competitive U.S. market.
T-Mobile CEO John Legere said at an investors conference in Germany that early next year the company will eliminate its contract plans -- which include the $70 unlimited data, voice and text plan launched in September -- with a discounted phone (most in the $199 range) in favor of plans in which customers pay the full price for phones but pay a lower price per month. If customers decide to cancel their plan they must reimburse T-Mobile for the remaining cost of the phone.
Details of the plan prices were not disclosed.
Finding a Niche
"T-Mobile needs to carve out a successful niche," telecommunications analyst Jeff Kagan told us Friday. "At this point I think this thinking could be successful if they market it well. And that is the problem. T-Mobile has not marketed well for a long time.
"Changing the basis on which they do business from postpaid to prepaid may work, and I hope it does. But it also could hurt them if they don't do it right. There are already leaders in both prepaid and postpaid, so either way will be tough."
T-Mobile is the last major nationwide carrier to be waiting for the iPhone, but Legere assured investors that his company will not be subject to volume sales commitments as part of its deal with Apple.
T-Mobile already serves about a million customers with iPhones who have purchased them elsewhere as part of its Bring Your Own Device Program, and Apple at the end of last month started selling the unlocked GSM version of the iPhone 5, which is compatible with T-Mobile's network.
Late To LTE
The iPhone 5, however, is capable of 4G long-term evolution data speeds, which would leave T-Mobile customers wanting since the carrier will just begin to roll out its LTE network next year. T-Mobile considers its current HSPA+ data speed 4G.
T-Mobile famously tried to merge with No. 2 carrier AT&T in 2011, but the Justice Department sided with consumer groups and other carriers in opposing the move, saying it would create too big an entity and drive prices up.
In third-quarter results released last month, T-Mobile said it lost 492,000 customers, compared with 557,000 in in the second quarter, but more than the same quarter of 2011, 389,000.
T-Mobile also said smartphones accounted for 77 percent of sales, which were up 28 percent year-on-year to 2.3 million units.
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