CORRECTED-T-Mobile USA kicks off service pricing without phone subsidies

Mon Mar 25, 2013 7:59pm EDT

(Corrects price of Verizon's 4 gigabyte monthly plan in 9th paragraph to $110 from $70)

NEW YORK, March 25 (Reuters) - T-Mobile USA is ditching phone subsidies under a new set of service plans, hoping to differentiate its offerings from bigger rivals by promising customers more flexibility.

The No. 4 U.S. mobile network operator, owned by Deutsche Telekom, hopes to regain ground after heavy customer losses to rivals such as Verizon Wireless and AT&T Inc in recent years. T-Mobile USA is proposing to merge with its smaller rival MetroPCS Communications,

While its bigger rivals tie customers into two-year contracts in exchange for discounts on smartphones, T-Mobile is doing away with the device discounts and telling customers they don't need to commit to a contract.

Instead, customers can pay for their phone over time in monthly payments that are separate to their service fees.

But even with the monthly phone payments, BTIG analyst Walter Piecyk said, T-Mobile customers would still pay less than at AT&T or Verizon Wireless. The biggest discount would be for customers who keep their phones longer than two years or hand down a device to another family member.

"This could be an effective way for T-Mobile to reinvigorate its efforts to brand itself as the low-priced option in the market," Piecyk said in a research blog.

Executives at AT&T and Verizon have said they could follow T-Mobile's footsteps if its new options prove popular with consumers. But many consumers may prefer the more traditional model, according to some analysts. [ID: nL1E8N7FXJ]

The plans, which were on the company's website on Monday ahead of a Tuesday press event, start at 500 megabytes of data downloads and unlimited talk time and text messaging for $50 and increase to $60 a month for 2.5 gigabytes of data or $70 a month for unlimited data usage.

Verizon wireless charges $90 for 1 gigabyte of data and offers 4 gigabytes for $110 and AT&T charges $95 a month for 1 gigabyte of data and $110 for 4 gigabytes of data.

On its website T-Mobile USA shows that it is clearly going after AT&T customers by comparing its pricing directly to prices at the No. 2 U.S. mobile provider.

T-Mobile USA customers who already have a phone would benefit from the lower service prices would benefit most from the new offerings but those buying a new phone would have to pay a monthly fee for the phone.

For example, its starting price for a Samsung Electronics Co Galaxy S III is $69.99 and $20 a month for two years, which adds up to $549.99.

In comparison Verizon Wireless and AT&T charge $200 for the same price to customers who sign a two-year contract.

Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc. (Reporting By Sinead Carew; Editing by David Gregorio)