T-Mobile’s plan to sell Apple’s iPhone in 2013 without swallowing more than $400 in subsidies per customer is risky — but could shake up the wireless category.
After all, T-Mobile will have to convince customers that paying full price for an iPhone, roughly $650, is a better deal than that offered by rivals. Verizon Wireless, AT&T and Sprint charge $199, eating the rest of the cost and hoping to make it up on data charges.
A quick look at the numbers, though, shows T-Mobile CEO John Legere’s plan may not be impossible.
Under T-Mobile’s current value plans, customers get unlimited 4G data — albeit on a network less robust than Verizon’s or AT&T’s — for $70 a month. At that rate, the cost of an iPhone and a two-year plan would be $2,330. Two-year plans at Verizon can cost about $2,600 even after the iPhone is subsidized, and that’s if the customer uses two gigabytes or less of data a month.
That would make ownership of a T-Mobile iPhone 10 percent less expensive.
T-Mobile’s strategy of no subsidies may be the only way for it to get in the iPhone game, a place it needs to be if it wants to compete, said Anil Doradla, an analyst with William Blair & Co.
“The mobile operator needs to have the balance sheet to support subsidies, billions in subsidies in AT&T’s case,” Doradla said. “T-Mobile being the smaller guy has only limited bandwidth in terms of putting dollars to work.”
T-Mobile announced last week its deal to start selling Apple gadgets next year. It is the last of the major carriers to gain access to Apple’s phones.
Under one scenario, Deutsche Telecom-owned T-Mobile could sell the iPhone for an upfront fee of about $99 — with the balance paid off over 20 months.
Legere also hinted T-Mobile would seek to separate itself from rivals by allowing customers to upgrade to other iPhone models whenever they wanted.