| NEW YORK
NEW YORK Dec 6 T-Mobile USA said on Thursday it
planned to stop subsidizing smartphones, the first major U.S.
carrier to do so, in a move it hopes will cut costs and woo
customers frustrated with restrictions on upgrades in
T-Mobile USA also announced an agreement to sell the iPhone,
becoming the last big carrier to sign on with Apple Inc
, which will also help it win new customers and keep
U.S. operators typically pay phone subsidies, giving
subscribers discounts in exchange for tying them into a two-year
contract. While this helps retain customers, it also ramps up
costs, particularly for the higher-priced iPhone.
The No. 4 mobile service provider, which has been struggling
with customer losses, already gives customers the option to pay
less for their phone service if they forego a smartphone
Next year, T-Mobile USA plans do away with subsidies
entirely, Chief Executive John Legere said in parent company
Deutsche Telekom's investor meeting, which was
The move will cut T-Mobile USA's upfront costs but Legere
also expects it to appeal to customers, who dislike restrictions
on how often they can upgrade their phones under the subsidy
model favored by bigger rivals Verizon Wireless Inc, AT&T Inc
and Sprint Nextel Corp.
"We think there is huge room for a challenger to change some
of that, in a way that the larger players will not be able to or
will choose not to respond to," the executive said.
Under the unsubsidized model, Legere said customers will be
able to upgrade their phones when they want to by trading in the
device. T-Mobile USA's bigger rivals have been restricting
upgrades to keep their subsidy costs under control.
He did not say when exactly in 2013 the company plans to
switch entirely away from subsidizing phones. Around 80 percent
of the company's new phone activations are currently from
subscribers who have decided not to pay a subsidy for their
While T-Mobile USA has long wanted to sell the iPhone, which
first went on sale at AT&T in 2007, the phone's high price
appeared to stop it from reaching a deal with Apple.
Legere said that T-Mobile USA worked hard to come to a deal
with Apple and promised that the Apple experience would be
"dramatically different" compared to other operators.
He said T-Mobile USA did not have to make the same kind of
commitment Sprint made to order a certain number of iPhones, but
did not give further details about his company's deal with
Sprint agreed to pay Apple a minimum of $15.5 billion over
four years for selling the iPhone.
Legere did not say when T-Mobile USA would start selling
Apple products but said it would be months before he could give
T-Mobile USA has agreed to merge with smaller rival MetroPCS
Communications Inc next year.