T-Mobile's Legere Kicks Butt. Will It Matter?
Mar 27th 2013 7:00PM
Updated Mar 27th 2013 7:06PM
T-Mobile has been mentioned more lately than any time since the FCC and Department of Justice pulled the company from the wide-open merger maw of AT&T-Rex last year.
That mega merger not-to-be put a few billion dollars of penalty fees in T-Mobile's treasury, but the question of "What next?" for the Deutsche Telekom subsidiary still lingered... along with something else: the chip on T-Mobile's shoulder from being the U.S.' No. 4 mobile carrier (after No. 3 Sprint Nextel , no less).
Here's T-Mobile CEO John Legere's no-holds-barred assessment of the quality of his company's former altar-mate at this January's CES:
Anybody here from New York? Any of you use AT&T? Any of you that use them, are you happy? Of course not, the network's crap.
And that was just the beginning of the colorful language, folks. He got more explicit yesterday at the T-Mobile event in NYC staged to kick off the carrier's LTE network, confirm getting the iPhone, and announce its new "Uncarrier" plans. Legere derided the postpaid contract model pushed by Verizon , AT&T, and Sprint.
"Carriers are really nice to you ... once every 23 months," he added.
A contract is a contract is a contract
But when consumers put the Uncarrier to the sniff test, they may come away with the same assessment of the plan that Legere has of the other carriers' plans.
The current two-year commitment consumers must make at the other three first-tier U.S. wireless carriers gives them a phone at a much lower cost than what the phone's retail price would be. Sometimes the phone even comes free.
A base iPhone 5's retail price of $649 falls to $199 when coupled to a two-year contract from AT&T, Verizon, and Sprint. Of course, the $450 price difference will be made up for by the 24 monthly plan payments to come.
The T-Mobile plan, on the other hand, does not subsidize the cost of the phone. An iPhone 5, which T-Mobile will begin offering on April 12, will cost the full retail price. However, if customers prefer not to -- or cannot afford to -- pay full price, they will have the option of buying that phone over time.
For example, the iPhone 5 from T-Mobile will cost $580 -- without a contract, of course, because there are no more contracts at T-Mobile. But, one can get that same phone by putting $100 down and committing to two years' worth of $20 monthly phone payments .
But won't the customer have to sign a two-year contract stipulating the 24 $20 payments? Of course they will. So is there really a difference between T-Mobile and the other carriers? In reality, no.
And who is eating/subsidizing the $70 difference between Apple's retail price for that phone and the price charged by T-Mobile? It looks like T-Mobile will have to choke down the difference.
In the end, I think, any subscriber increase for T-Mobile will have to come from quality of service coupled with price savings -- not from any contract Legere-demain. I think the wireless giants and Sprint will be safe for now.
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The article T-Mobile's Legere Kicks Butt. Will It Matter? originally appeared on Fool.com.Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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