T-Mobile US (NYSE:TMUS) plans to offer up to 200 MB of free LTE data each month for life for customers who use tablets on its network. The carrier said its latest "uncarrier" move is designed to get customers using cellular data on their tablets.
The offer, which T-Mobile dubbed "Tablets Un-leashed," applies not only to Apple's just-announced (NASDAQ:AAPL) iPad Air and new iPad mini, but all tablets that can be used on the carrier's network, including tablets customers have brought to the carrier. Starting Nov, 1, the company said cellular-enabled tablets will work right out the box without any setup and the 200 MB offer will apply even if customers do not have an existing billing relationship with T-Mobile.
"We believe it's time that tablets operate the same way that smartphones do and should be connected and used all the time," T-Mobile CEO John Legere said during a news conference Wednesday afternoon. Legere said most U.S. consumers do not use cellular data for tablets because they are "scared to death of how big the bill can get" and how unpredictable billing can be.
Customers who want more than the 200 MB of data can choose from a range of options. For existing T-Mobile voice customers, the carrier will offer "always-on" tablet plans that start at $10 per month for unlimited data, including 500 MB of LTE data per month (for customers who are not T-Mobile voice subscribers, that plan starts at $20 per month). Customers can add more LTE data in 2 GB increments for $10 more per month. When customers exceed their allotment of LTE data, their speeds will be throttled.
Additionally, T-Mobile will offer daily passes that include 500 MB of LTE data for $5. The weekly passes include 1 GB of LTE data for $10. Once customers reach the time limit or data allotment they will not be throttled but will simply have their service stop and be prompted to purchase more data via passes, according to T-Mobile CMO Mike Sievert.
For comparison, AT&T Mobility (NYSE:T) recently introduced a $5 tablet plan that will give subscribers 250 MB of data for a single day as well as a $25 plan for 1 GB that can be used any time in a three-month period.
For a limited time (T-Mobile did not say how long), it is charging $0 down for tablets, as long as customers qualify for a monthly installment plan, and is charging $26 per month for the iPad Air, $22 per month for the new iPad mini with Retina display, $18 per month for a first-generation iPad mini and $16 per month for a Google (NASDAQ:GOOG) Nexus 7. T-Mobile is also launching a tablet trade-in program and beginning Nov. 1, anyone with a qualifying tablet (even if it is a Wi-Fi-only tablet) can bring it into a participating T-Mobile store and receive a discount on a new tablet.
Sievert said the goal of the 200 MB of free data for life offer is to get customers using cellular data. "We know that when people try this network they are going to stay with it," he said, noting that T-Mobile's LTE network now covers 202 million POPs.
Most U.S. customers do not consider cellular connectivity a necessity for their tablets. According to a May report from the NPD Group, the percentage of tablets that actually do connect to 3G or 4G networks is relatively small -- NPD found that only 12 percent of all tablets in the U.S. connect to cellular networks. Carriers are trying to change that by introducing shared data plans to try to make the cost of adding a cellular tablet connection less expensive. Analysts have said AT&T leads U.S. carriers in terms of the number of cellular-enabled tablet connections.
Verizon Wireless (NYSE:VZ), AT&T, Sprint (NYSE:S), U.S. Cellular (NYSE:USM), C Spire Wireless and Bluegrass Cellular will get the new iPads as well.
Analysts said that they thought the plan would generally be positive for T-Mobile and might negatively impact subscriber additions at Verizon and AT&T. "This could reduce net adds at AT&T and VZ by 10% to 20%," New Street research analyst Jonathan Chaplin wrote in a research note. "Now that TMUS is attacking AT&T's last source of growth, it will be interesting to see whether AT&T will respond more aggressively. In general we expect competition to intensify throughout 2014, putting pricing and margins at risk for all of the carriers."
"We think the combination of having the iPad for the first time and the appeal of free data will drive incremental traffic to T-Mobile stores," Credit Suisse analysts Joseph Mastrogiovanni and Henrik Herbst wrote in a research note. "This will give store reps an opportunity to upsell the data package (equipment installment plans require a service plan of $20/500MB/month or more) or sell other devices. We believe this provides another source for T-Mobile to keep the subscriber momentum going. Additionally, given average network data usage on iPads (1.1GB/month according to Mobidia), we believe customers that take the 200 MB/month plans could quickly move to data bundles with fees."
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Article updated Oct. 23 at 12:45 p.m. ET with additional information from T-Mobile.