Report: T-Mobile to move customers off grandfathered plans to new rate plans

T-Mobile US (NYSE:TMUS) has indicated it will move customers off of grandfathered legacy rate plans to new rate plans starting next month. However, many details about the changes remain uncertain.

The changes, which were first reported by the blog TMoNews, stand in contrast to the carrier's "uncarrier" marketing of being different than its larger competitors. However, T-Mobile is positioning the change as one that will allow it to simplify its offerings.

"Maintaining thousands of rate plans is the norm in the industry, but we think it creates unnecessary complexity," the carrier said in a statement to TMoNews and Engadget. "Simple is better, which is why we're reducing the number of older plans in our systems. We're giving customers on these plans the opportunity to choose a plan that best meets their needs. For the vast majority, their plan will provide similar or better features at a comparable price."

A T-Mobile spokeswoman did not immediately respond to a request for comment on several questions, including why the changes were being made, when they would go into effect and what choices customers on legacy plans would have moving forward.

A recently leaked image of a letter a T-Mobile customer received about the changes, which was posted on HowardForums, sheds some light on the move. According to the letter, which thanked the customer for his or her loyalty and told them that a new rate plan has been "chosen" for them, T-Mobile said it has listened to customer requests for how to simplify wireless and has "responded by restructuring all of current plans to be simple and straightforward--and with unlimited voice now included in all plans."

The letter, which was signed by Steve Greene, director of marketing at T-Mobile, said that the customer's legacy plan would be retired in November. "With this [new] plan you may pay more for your service, but you'll continue to enjoy access to the latest smartphones, and T-Mobile's advanced nationwide 4G network with LTE, rolling out in 2013." The letter said the customer would have until Feb. 1, 2014 to cancel service without any penalty.

Starting in late March T-Mobile introduced is "Simple Choice" no-contract plans, which come with unlimited voice, texting and web access, and vary in price depending on how much high-speed data customers want, with rate plans starting at $50 per month for 500 MB and going up to $70 for unlimited data. Under these plans, customers can either bring their own unlocked phones to T-Mobile, pay full price for devices or make a down payment and then pay off the rest of the cost of the device in monthly installments.   

T-Mobile CMO Mike Sievert recently said that the No. 4 carrier targets rival AT&T Mobility (NYSE:T) the most in its advertising because, he claimed, AT&T has the largest pool of dissatisfied customers.

"They (AT&T) combine two things: being big and being bad," Sievert said in late September during an appearance with other T-Mobile executives at the Goldman Sachs Communacopia Conference. However, in August J.D Power said AT&T outscored all other full-service wireless providers for "the overall customer service experience measured across its retail stores, online, and call centers." T-Mobile CTO Neville Ray also noted that it's relatively easy for AT&T customers to switch over to T-Mobile because both carriers operate GSM-based networks. 

T-Mobile said branded postpaid average revenue per user decreased year-over-year by 6.5 percent in the second quarter to $53.60, down from $57.35 in the second quarter of 2012, primarily as a result of increased adoption of Value and Simple Choice plans, which it said deliver lower ARPU due to lower service charges compared to traditional plans bundled with a discounted handset. The plans result in lower monthly service revenues while recognizing higher equipment revenues at the time of sale.

The company expects the penetration of its Value/Simple Choice plans in its branded postpaid base to be between 60 percent and 70 percent by the end of 2013, up from around 50 percent at the end of the second quarter.

For more:
- see this TMoNews article
- see this Engadget article

Related Articles:
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T-Mobile kills international data roaming fees
T-Mobile CMO knocks AT&T for 'being big and being bad'
Verizon's McAdam dismisses unlimited data plans: 'You will run out of gas'
AT&T's Aio aims to be a nationwide prepaid brand, on par with MetroPCS
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