T-Mobile will at long last offer the Apple iPhone, but does the carrier's new math add up?
Apple iPhone 5S: The Hot Rumors
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With much fanfare and hullaballoo, T-Mobile USA CEO John Legere announced that the company will finally offer Apple's smartphone. The iPhone 5 goes on sale from T-Mobile April 12, but customers can sign up starting April 5. T-Mobile is advertising the iPhone 5 for $99, but that's not necessarily what you'll pay.
The $99 is actually a down payment on the iPhone 5. Thereafter, T-Mobile's iPhone 5 customers will make monthly payments of $20 for 24 months until the device is paid off. Between the down payment and the monthly installments, the total amounts to $580 -- that's about $70 less than the iPhone 5's raw $649 selling price.
As soon as the iPhone 5 is paid off, you'll own the device, whether or not you stick with T-Mobile USA. Even better, once you own the device, T-Mobile USA will unlock it so it can be used on competing networks. (Yes, new phones will be locked to T-Mobile's network.)
The beauty of T-Mobile's new model is that there are no contracts. Customers can leave at any time. Legere even said, "If we suck for a month, leave! Go somewhere else!" Of course, he also said T-Mobile hopes that customers will love its new service enough that they will stay.
Asked what happens if a customer leaves T-Mobile after having made only a few payments, T-Mobile didn't really have a good answer. Instead, Legere said the payoff amount will be based on what's left of the remaining payments and the fair market value for the iPhone 5 (if the customer wants to turn the device in). T-Mobile's wishy-washy answer is somewhat concerning.
There are no penalties, said T-Mobile, for accelerating payments or paying off the device in full instead of making the $20 monthly payments. T-Mobile claimed it is offering this financing option with no interest. In fact, its $580 total price actually saves consumers money compared to buying the phone outright from Apple.
Beyond the down payment and the monthly $20 fee, customers will of course need a service plan for their iPhone 5. The cheapest plan costs $50 per month and includes unlimited voice, unlimited messaging and 500MB of data. Want more data? Pay more.
That means an iPhone 5 and T-Mobile's cheapest plan amount to $70 per month together. Is that a good deal? It really depends on how you think about it.
For starters, T-Mobile's iPhone 5 is (thankfully) optimized for its network. That means you'll get LTE 4G support in the 1700MHz band, as well as HSPA+ 3G in the 1700 and 1900MHz bands. T-Mobile's iPhone will be the only one that offers HD Voice (higher-quality phone calls). Beyond these customizations, T-Mobile's iPhone 5 is the same as every other iPhone 5. The other carriers charge from $199 to $399 for the iPhone 5, depending on storage, at contract inception.
The key benefit for T-Mobile customers here is the lack of a contract. Unhappy T-Mo customers can walk away at any time. That's a powerful motivator for T-Mobile, which needs to earn its customers' business each and every day. Other carriers lock customers into two-year contracts, which prevents them from leaving. The no-contract option is certainly appealing. Whether or not T-Mobile's services can live up to the demands from iPhone 5 customers is another matter entirely.
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