T-Mobile to Move Away from Device Subsidies in 2013,Details LTE Launch Plans

Lost in the excitement of yesterday’s Apple announcement, T-Mobile also confirmed that it would move away from the conventional hardware discount for 2 year agreements beginning next year.

This move will make T-Mobile USA the first US carrier to adopt the standard international sales model for wireless service and hardware and follows years of criticism from executives regarding typically deep device subsidies affecting profitability and operational costs related to providing such device subsidies in order to draw more customers.

This means that the current slate of Value plans as found on the carrier, whereby customers sign a 2 year contract and pay a fixed initial down payment with 20 smaller monthly payments spread across the length of the agreement or a single complete payment will be the standard sales model going forward, with lower rates for monthly service in exchange for the higher device pricing compared to the current industry standard 2 year agreement.

This move will serve as a way for T-Mobile to not only differentiate itself from the other carriers as it works to correct the direction of the company following the blocked AT&T purchase as well as increase interest in the purchase of unlocked devices as the current implementation allows for BYOD, the future of the Value plans means that those that do purchase unlocked devices and sign up for service stand to save more money on their monthly service  than those that pay off their devices in monthly installments, since the cost of monthly service is up to 20% less than competing rate plans, especially when taking T-Mobile’s revived unlimited data plan option into account.

The announcement also ties into the Apple announcement, with T-Mobile CEO John Legere stating that Apple hardware would not be offered with a conventional subsidy on T-Mobile and that its agreement with the manufacturer did not involve a volume purchase similar to Sprint’s own agreement, which explains the shorter than average sales agreement for hardware.

In related news, as T-Mobile continues its network reconfiguration in preparation for its planned LTE launch next year executives also detailed its plans for the rollout and how it would progress, starting with the following:

• Coverage will begin with 100 million LTE pops for the first half of 2013, with the second half of 2013 expanding to 200 million POPs covered. Release 10 LTE (2×10, 2×20) will better performing than all other competitors according to the carrier.
• T-Mobile is spending $4 billion in 2012 on network modernization, $4.8 billion in 2013 and a total of $6 billion between 2014 and 2015. “In total, $10.7 billion in investment will be made over the next 3 years”
• The increased investment is expected to lead to 100 million POPs coverage on 1900 MHz 3G  before the end of 2012 with a newly expanded count of 19 markets currently rolled out following the recent addition of four additional markets this month alone, with more announcements expected later in the month.

The substantially increased investment in the transition to 1900 MHz 3G and LTE is expected to lead their Challenger Strategy going forward along with a renewed focus on its currently lagging customer service rankings, rankings it hopes to improve with new initiatives next year to coincide with the launch of LTE service.