T-Mobile kills wireless contracts, will launch iPhone 5 on April 12

T-Mobile USA formally unveiled its new no-contract pricing without device subsidies and also said after years of waiting it will launch the LTE-capable Apple (NASDAQ:AAPL) iPhone 5 on April 12. The carrier also launched its LTE network in its first seven markets.

At a media event today in New York City, T-Mobile CEO John Legere and other executives detailed their aggressive new strategy to be the "Uncarrier," offering a different kind of service from the other Tier 1 wireless carriers. Legere said that T-Mobile wants to break down distinctions between "postpaid" and "prepaid" wireless business. "The worst fear from the wireless industry is that someone from outside Oz comes and starts looking at their industry," the edgy Legere said.

Legere said the only difference between prepaid and postpaid is that if a customer has poor credit, they pay at the beginning of a month before they use the service. Postpaid means a customer with good credit pays at the end of the month after they have used the service. Customers with good credit will also be able to access the carrier's handset financing options. Legere said T-Mobile is going to eliminate the prepaid/postpaid distinctions by just going with a no-contract offering without device subsidies. Customers can either buy their smartphone outright for the full cost of the device or they can make a down payment and then pay for the remainder of the cost of the device in monthly installments. Additionally, customers can bring unlocked devices to T-Mobile .

T-Mobile is planning to advertise its new offerings with a major new ad campaign.

Legere said T-Mobile is trying to simplify the wireless business by not tying the cost of a phone to a two-year contract, as Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and Sprint Nextel (NYSE:S) do for their postpaid businesses. "It becomes flat and transparent there is nowhere to hide," he said.

T-Mobile is taking pre-orders for the iPhone 5 and will begin selling it April 12.

T-Mobile said the iPhone 5 will be available for customers with qualifying credit for a down payment of $99.99 and $20 per month for 24 months. Qualifying customers can get iPhone 4S for $69.99 down and $20 per month for 24 months, and the iPhone 4 will be available for qualifying customers through the Simple Choice Plan for $14.99 down and $15 per month for 24 months. T-Mobile said the financing is available on approval of credit online and in participating locations.

Importantly, T-Mobile said its version of the iPhone 5 will support its LTE and HSPA bands, which means that Apple has designed a unique version of the phone for T-Mobile's network. However, the carrier's iPhone 4S and 4 will not carry the same configuration, and as a result those devices will only be available in "select" markets and channels. 

Interestingly, T-Mobile also said its new iPhone 5 will support the carrier's HD Voice technology, which it launched earlier this year.

"We're unleashing everything and we're going to remove all the barriers for customers to have a great wireless experience," Legere said. "Customers don't need another AT&T. Customers need someone to stop acting like AT&T."

T-Mobile's new plans, which it has dubbed "Simple Choice," break into three options:

  • $50 per month for unlimited talking and texting and 500 MB of high-speed data. Smartphone hotspot service is included. Speeds may be slowed to 2G speeds after 500 MB.
  • $60 per month for unlimited talking and texting and 2.5 GB of high-speed data. Smartphone hotspot service is included. Speeds may be slowed to 2G speeds after 2.5 GB.
  • $70 per month for unlimited talking and texting and unlimited high-speed data. The plan also includes 500 MB of smartphone hotspot service, with additional data costing $10 for 2 GB.
  • Customers can add a second phone line for $30 per month. If customers add a third, fourth or fifth line, those each cost $10 per month.

The new model is disruptive in the sense that the other Tier 1 carriers count on two-year contracts to get steady streams of revenue to recoup the subsidy they pay for smartphones.

As for T-Mobile's LTE launch, the carrier said its LTE network is now live in seven markets on its 1700 MHz AWS spectrum, including Baltimore; Houston; Kansas City; Las Vegas; Phoenix; San Jose, Calif.; and Washington, D.C. Legere added that New York City will be online with LTE by early summer. The carrier plans to cover 100 million POPs with LTE by mid-2013 and 200 million by year-end. Legere said that when T-Mobile merges with MetroPCS (NYSE:PCS), T-Mobile will be able to deploy 2X20 MHz LTE in 90 percent of the top 25 U.S. markets. (MetroPCS shareholders will vote on the deal April 12.)

Legere noted that the company already has 225 million POPs covered with its HSPA+42 network, and Legere said there are 140 million POPs now covered by the carrier's refarmed 1900 MHz PCS spectrum. The carrier plans to expand its HSPA network on 1900 MHz to 200 million POPs by the end of the year. Legere said that "right now we have more bandwidth than you know what to do with."

As for LTE devices, T-Mobile CMO Mike Sievert said that said the carrier will launch the Samsung Galaxy S4 in May, though the company did not detail pricing. The BlackBerry (NASDAQ:BBRY) Z10 will be available for qualifying customers for $99.99 down with 24 equal monthly payments of $18. Legere said the HTC One will be available for a $99.99 down payment, though he did not detail the monthly payments. T-Mobile also said it will launch the Sonic 2.0 LTE mobile hotspot for $29.99 down with 24 equal monthly payments of $5. T-Mobile also said the Samsung Galaxy Note II will take advantage of T-Mobile's LTE network via an over-the-air software update. Sievert said T-Mobile phones will get unlocked when they are either traded back or paid off in full.

T-Mobile said customers will be able to trade in their devices and move to new devices, though the company did not provide many details on this upgrade program. A T-Mobile spokesman told FierceWireless that customers are responsible for paying the full cost of their devices, either in a lump sum or through monthly payments. However, he noted that under the trade-in program, they can trade in their existing phone and can get the "fair market retail value" for the phone (as assessed by T-Mobile), and use that money toward paying off the rest of that device. The money can also be used to purchase a new phone. The spokesman also said customers can bring in their existing phones, trade them in and then have that cash applied toward a new phone.

For more:
- see this T-Mobile release
- see this T-Mobile/Apple release
- see this Yankee Group blog post

Related Articles:
T-Mobile undercuts AT&T, Verizon with new Value plans, starting at $50/month
T-Mobile's LTE network shows 25 Mbps downloads in early tests
Report: T-Mobile will offer rate plans with handset subsidies through third-party retailers
T-Mobile to unveil new 'Un-carrier' strategy at March 26 event
T-Mobile loses 515,000 postpaid subs in Q4, sets sights on iPhone, MetroPCS deal
T-Mobile to offer unlimited prepaid data for $70 per month
T-Mobile kills device subsidies

Article updated March 26 with additional information from T-Mobile on the carrier's new trade-in program.