By Sinead Carew
NEW YORK, March 26 T-Mobile USA said on Tuesday
that it will start selling Apple Inc's iPhone on April
12, making it the last of the big national U.S. operators to
sell the popular smartphone.
The No. 4 U.S. mobile provider, which is seeking to merge
with smaller rival MetroPCS Communications, is hoping
the device can help stem customer losses. The launch follows a
marketing overhaul that eliminates device subsidies and two-year
service contracts favored by its bigger rivals.
T-Mobile, a unit of Deutsche Telekom AG, hopes
its new approach will differentiate it from bigger rivals that
already sell the iPhone: Sprint Nextel, AT&T Inc and
Verizon Wireless, a venture of Verizon Communications and
Vodafone Group Plc.
The company, which struggles with customer defections, hopes
to attract cost-conscious consumers through an aggressive
marketing campaign that focuses on its lack of service contracts
and clearly outlines the monthly cost to consumers to own
devices such as the iPhone.
U.S. operators have traditionally subsidized phones in
exchange for tying customers into contracts but do not disclose
how much of their monthly charges covers the device, a practice
that T-Mobile USA criticized as lacking transparency.
"The industry's broken," T-Mobile Chief Executive John
Legere said at a press event to announce the iPhone launch and
discuss the service plans, which he promised late last year.
In particular, T-Mobile USA is taking aim at No. 2 U.S.
operator AT&T because the two companies use the same network
technology, making it easier for consumers to bring their AT&T
phones to T-Mobile's network.
Legere estimated that T-Mobile customers would pay about
$1,000 less over two years than they would for roughly
comparable services at AT&T. T-Mobile's website also directly
compares its pricing to AT&T's service fees.
However, AT&T appeared unfazed by the campaign. Spokesman
Mark Siegel's response was: "Whatever."
Legere said that the iPhone and the new marketing plans will
help the company stem its losses of bill-paying customers this
year and create growth in this segment in 2014. The company,
which ended 2012 with 33.4 million customers, lost 515,000
contract customers in the fourth quarter.
"You'll see discernable progress each quarter," the
executive told Reuters, promising significant improvement in
first quarter from the fourth quarter and second quarter numbers
that are significantly better than the first quarter.
T-Mobile will offer the iPhone 5, Apple's latest model, for
an upfront payment of $99.99 followed by 24 monthly payments of
$20, adding up to $580 over two years. Its rivals charge $200
upfront to customers who sign a two-year contract, but customers
who do not sign a contract pay about $650.
Slight differences in operators' service plans make
comparison of total costs for consumers difficult, but analysts
said that T-Mobile's offer does appear to be cheaper than those
of its bigger rivals.
Reticle Research analyst Ross Rubin said it was still
unclear whether consumers have as much disdain for contracts as
T-Mobile hopes. But he said consumers will likely find the lower
upfront cost for phones attractive and that the addition of the
iPhone should help T-Mobile retain customers.
"Not having the iPhone 5 was certainly a big hole in its
portfolio," Rubin said.
T-Mobile said it will sell the older iPhone 4 for a $69
up-front payment and a commitment to pay $20 a month for two
years. It also promised smaller upfront fees for the latest
smartphones from BlackBerry and HTC Corp.
Bigger rivals AT&T and Verizon have said they would closely
watch T-Mobile's new service model and that they could follow
suit if it proves popular with consumers.
Andrew Sherrard, T-Mobile's senior vice president of
marketing, said the company would significantly increase its
marketing spending, but he declined to give details.
T-Mobile also said on Tuesday that it had upgraded its
network with faster data services in seven markets using the
Long Term Evolution (LTE) technology that its bigger rivals have
a head start in delivering.
T-Mobile promised to offer LTE in markets with a population
of 100 million by mid-year and expects to broaden coverage to
200 million by year end.
One key element of Legere's strategy involves the proposed
merger with MetroPCS, which needs shareholder approval at a
special meeting on April 12, the date of T-Mobile's iPhone
Two large activist shareholders, Paulson & Co Inc and P.
Schoenfeld Asset Management, are campaigning to block the deal
due to the level of debt that the combined company will have on
its books. But Legere insisted the merger would go through.
"It will be approved despite ... several greedy hedge funds
that are trying to take a double-dip out of that process,"