By Sinead Carew
NEW YORK, July 10 T-Mobile US Inc said
on Wednesday that customers will be allowed to upgrade phones
every six months and it unveiled a family plan for prepaid
customers that it hopes will lure customers away from its three
Verizon Wireless , AT&T Inc and Sprint
Nextel Corp offer phone discounts in exchange for tying
customers to two year contracts and typically do not allow phone
upgrades during that period.
T-Mobile, which is under pressure to stem years of customer
losses, said it is already seeing good results from its efforts
to differentiate itself from bigger rivals. Now, it is betting
people will switch to its service because they want to change
phones more often than its rivals allow.
"You can upgrade when you want, not when you're told,"
T-Mobile Chief Executive John Legere, who was appointed in
September 2012, told reporters and analysts at a New York event
where he announced the changes.
Legere told Reuters he expects the offer to improve customer
loyalty and to increase the number of new customers T-Mobile
lures from other carriers each quarter without having a big
financial impact on the company.
The No. 4 U.S. mobile provider also hopes to attract more
customers who pay for calls in advance by offering a prepaid
family plan that does not require a credit check.
It said its $100 monthly fee for a family of four is about
$100 less than AT&T's service. It expects a lot of interest in
the service as it estimated that a third of U.S. families would
not pass the credit checks required for typical family plans.
AT&T and Verizon attribute much of their success in
retaining customers to these plans because it is harder for an
entire family to change service than an individual.
Customers who want frequent phone upgrades must sign on to a
service called Jump that requires them to pay a $10 monthly
insurance fee on top of monthly service fees and a one-off down
payment that partially covers the cost of the phone. They are
also charged a monthly fee of up to $20 per month to pay for the
remainder of the phone.
When T-Mobile customers want an upgrade, they can bring a
phone to a store and swap it for a new device. They pay another
down-payment and resume monthly payments for that device. The
moves follows T-Mobile's elimination in March of long-term
contracts and handset subsidies.
T-Mobile will lose money in some cases if a customer trades
in a lower value phone for a more expensive one, according to
Chief Financial Officer Braxton Carter.
But he told Reuters this would likely be evened out by the
fact that popular phones such as the iPhone can keep as much as
70 percent to 80 percent of their original value after a 6-month
trade in. The company will then sell those phones back to
customers looking for a discount.
"We'll definitely attract more customers to our company by
having this innovation," Carter said. "By attracting more
customers, we're attracting more revenue and (better) margins.
This is a greater retention tool."
The event on Wednesday was T-Mobile's first media function
since it merged with MetroPCS in April.
Some analysts said the new plans could prove popular. But
Avi Greengart of Current Analysis questioned whether customers
would leave big providers because Verizon's network has a good
reputation and AT&T has a huge number of customers tied to
family plans that are hard to leave.
However, Greengart said the move should make those companies
"sit up and take notice."
T-Mobile also announced that customer defection rates are
lower than ever because of new marketing efforts and the
introduction in April of the Apple Inc iPhone, which
accounted for 29 percent of its smartphone sales in the second
While the company would not disclose total customer numbers
for the second quarter, it believed it had added the most net
customers of all the national U.S. carriers, at least in several
major U.S. cities. It cited strong customer growth compared with
its rivals in cities such as New York, Los Angeles, Miami,
Houston and Dallas.
T-Mobile shares closed 1.3 percent higher at $24.42 on the
New York Stock Exchange.