T-Mobile to drop subsidies as it adds the iPhone
Colin Gibbs- Thursday, December 6, 2012
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T-Mobile USA CEO John Legere said today that the nation’s fourth-largest mobile carrier will offer the iPhone beginning next year, addressing perhaps its biggest disadvantage vs. its bigger competitor. Legere said T-Mo’s iPhone experience will be “dramatically different” than that of other operators, although he declined to disclose any details about the upcoming offering.
Supporting the iPhone will be a huge plus for T-Mobile, which has bled postpaid subscribers recently even as it adds prepaid subscribers. But Phil Goldstein at Fierce Wireless rightly notes that the carrier’s announcement that it will drop handset subsidies may be even bigger news than its support for the iPhone. Doing away with subsidies will eliminate the up-front cost of carrying the iPhone or other handsets, which can easily surpass $200 per unit. It also will enable T-Mo to provide drastically cheaper service to those who can afford to buy devices outright.
I don’t expect AT&T or Verizon Wireless to stop handset subsidies any time soon — they’re doing just fine with the traditional model — and there’s still the question of whether T-Mobile’s network is up to the challenge of supporting the iPhone. If T-Mo executes well and explains the value proposition to consumers, though, this could be a disruptive step for unsubsidized handsets.
