T-Mobile US (NYSE:TMUS) is giving every customer with a monthly voice plan who has made or makes 12 consecutive on-time monthly bill payments access to zero-down financing for smartphones regardless of their credit score.
The program, called "Smartphone Equality," goes into effect Jan. 25 and applies to every prepaid or postpaid customer with a voice plan, regardless of their plan--or their credit history. If an existing customer has made 12 consecutive, on-time monthly payments they automatically qualify for the benefits: the carrier's best device pricing and financing, including $0 down on the newest smartphones with no interest and no credit check.
In a video blog post, T-Mobile CEO John Legere said this was a "big pain point for millions of people."
"This is one of the wireless industry's dirtiest little secrets," he said. "You know the fact is that half of Americans can't even get the deals that carriers spend billions of dollars shouting about."
Legere acknowledged that until now T-Mobile had engaged in the practice of denying the best financing to some of its customers. "Look, we've been doing this, too," he said. "But I listen and I'm making some changes. This ends now."
Legere added the other carriers "are just too stuck in their ways to ever see their customers as anything but a way to make money."
Matt Staneff, T-Mobile's vice president of customer loyalty, said in an interview with FierceWireless that 4 million T-Mobile branded prepaid customers (out of a little more than 16 million) do not have access right now T-Mobile's best financing because of their credit scores. He said a "pretty good size" of T-Mobile's roughly 27 million postpaid customers also fall into that category, though he did not provide a statistic for how many.
Staneff said that T-Mobile is listening to its customers and the carrier realized its relationship with its customer base was more important than customers' credit scores. He said the wider industry has been classifying how a customer will perform in terms of loyalty and on-time payments based on their incoming credit score and always treated low-credit customers, who tend to be poorer, worse than prime-credit customers.
When asked if T-Mobile faces any risk by adopting this strategy, Staneff said that such a question is "what's wrong in the industry" today.
"It's less about the credit score," he said. "It's more about the relationship we have with our customers."
Staneff said T-Mobile is "not at all" concerned about the potential credit risk posed by the Smartphone Equality program. He said that sub-prime customers who pay on time for 12 months straight perform better than new prime-credit customers who come into T-Mobile.
Staneff added that T-Mobile aims to make this the way the industry functions but said he is "not sure" competitors can follow because they still have billing practices like overages. He said that other carriers may feel there will be too much uncertainty in billing for low-credit customers.
- see this release
- see this T-Mobile blog post
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