T-Mobile USA Inc., the fourth- largest U.S. wireless carrier, began offering Apple Inc. (AAPL) (AAPL)’s iPhone for the first time today, providing the biggest showcase yet for its new installment-plan approach to selling phones.
Customers with good credit can buy the iPhone 5 for $99.99 down and 24 monthly payments of $20, the Bellevue, Washington- based company said, breaking from a tradition of subsidizing smartphones in exchange for two-year service contracts. T-Mobile also will take old iPhones as trade-ins for a new iPhone 5 with no down payment and a credit toward future bills.
The strategy “could resonate with customers,” Walt Piecyk, an analyst with BTIG LLC, said this week in a research note. At about $100, the upfront costs for an iPhone 5 through T-Mobile are lower than the $199 typically charged by rivals.
T-Mobile, a division of Deutsche Telekom AG (DTE), is counting on the Apple device to help reverse an exodus of subscribers. The company was the last of the four major U.S. carriers to get the iPhone, and T-Mobile has trailed competitors in adopting a speedier network standard called long-term evolution, or LTE.
As part of a makeover under Chief Executive Officer John Legere, the company is offering no-contract service plans that start at $50 a month. He has begun calling T-Mobile “the uncarrier” in an effort to distance itself from its three larger rivals, which still rely mostly on long-term service commitments. It also aims to bolster its network and customer base through a merger with MetroPCS Communications Inc. (PCS:US), a deal brokered by parent Deutsche Telekom.
T-Mobile is offering BlackBerry (BBRY)’s new Z10 phone using a similar installment plan, and it plans to begin selling Samsung Electronics Co.’s Galaxy S4 on May 1.
“Our goal is to give customers the lowest out-of-pocket cost of anyone in the industry,” Legere said when he announced the iPhone plan last month. “We’ll see how the competition responds. I don’t think the math is going to work out for them.”
T-Mobile lost 2.1 million monthly contract customers last year. Legere, who took the reins in September, has said the addition of the iPhone -- along with the new pricing plans and network upgrades -- will allow T-Mobile to stem subscriber losses in 2014.
Glenn Shuman, 47, was the first person in line this morning at the T-Mobile store at 55th Street and Third Avenue in New York. He was buying two iPhones, one for his wife and the other for his 18-year-old daughter.
“I’m happy with T-Mobile, and now with the iPhone, I’m doubly excited,” he said. A T-Mobile customer for six years, Shuman said he has been pleased with the company’s customer service and prices.
“I’ve looked at the Verizon and AT&T plans, and they are a little more expensive,” said Shuman.
David Monte, 75, and the other 14 people lined up in the rain outside the store this morning said they were already T- Mobile customers. “I have been waiting for the iPhone for five years,” said Monte. A decade-long T-Mobile user, Monte said he was going to sign up for the company’s new no-contract, $70 unlimited plan.
The combination of T-Mobile and MetroPCS would create a company with 42.3 million customers, with Deutsche Telekom owning 74 percent. The German phone company sweetened the terms of the deal this week to placate investors. The new offer, which now has the support of MetroPCS’s largest shareholder, will go to a vote on April 24.
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