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T-Mobile Plans To End Phone Subsidies

Bellevue, Wash. — T-Mobile hopes its launch of an iPhone sometime next year will help it rebuild its shrunken subscriber base, but the nation’s No. 4 carrier also wants to reduce the cost of acquiring more subscribers by ending the practice of subsidizing all phones.

T-Mobile would become the first national carrier to end the practice of subsidizing the consumer’s cost of a phone in return for a two-year subscription contract.

To end the subsidy practice for iPhones, the carrier said it would offer only Value Plans, which are currently optional, with the phone. Under the Value plans, consumers make an out-of-pocket down payment when they purchase a phone and 20 payments of $20/month on an installment plan to pay off the phone. In return for the higher handset cost, Value plans offers lower monthly rates than T-Mobile’s Classic plans.

In its third quarter, T-Mobile’s customer base grew by 160,000, but the company nonetheless lost 492,000 branded-postpaid subscribers, who represent the most profitable class of subscriber. With the gains, the carrier’s subscriber base grew to 33.3 million, but that was still down from the year-ago 33.7 million.