New T-Mobile Offerings Could Face Headwinds

Telecom & Wireless

Published: March 27, 2013 6:40 am

Last Updated: December 24, 2013 9:15 am

T-Mobile began to offer its “no contract” phone plan and said it will sell the Apple Inc. (NASDAQ: AAPL) iPhone 5 starting next month. A debate has begun about whether the program will draw customers of AT&T Inc. (NYSE: T), Verizon Wireless and Sprint Nextel Corp. (NYSE: S).

One factor that could hurt T-Mobile is that its 4G network is only deployed in a few locations around the country. Then there are the penalties customers may incur if they cancel their plans with T-Mobile rivals in order to take advantage of the “no contract” feature.

According to The New York Times:

[I]t may not be enough to persuade smartphone users to abandon the competition.

Analysts said the new marketing strategy, which spreads the cost of a new phone over two years as a separate line item on the monthly bill, will still feel like a commitment to many customers, even if they can choose to pay it off early and walk away. And T-Mobile, which has a slower network than its competitors, is only just beginning to introduce major upgrades.

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