Pay Now, Save Later: T-Mobile to Ditch Phone Subsidies in 2013

Next year will bring an end to T-Mobile’s iPhone drought, but that’s not the only major hardware change coming to the magenta-loving carrier in 2013. While T-Mobile may be the last major U.S. cellular provider to receive Apple’s vaunted handset, it will be the first to ditch subsidized phone pricing. That’s right, starting next year T-Mobile customers will need to bring or buy their own paid-for phone in order to sign up for a subscription.

Europeans are used to buying phones at full price, but most Americans don’t, and U.S. customers may stagger with sticker shock when they realize how much a smartphone actually costs. For example, while a subsidized iPhone 5 goes for $200 with a two-year contract, an unlocked version starts at $650. Legere, however, teased that T-Mobile has a trick up its sleeve to hopefully negate that problem.

The carrier could charge $99 for the iPhone (and presumably other handsets) up front, then let the customers pay off the phone in $15 to $20 per month installments over 20 months, GigaOm reports. That sounds similar to an optional payment plan T-Mobile implemented for Samsung’s Galaxy Note II phablet.

It’ll be interesting to see whether or not T-Mobile’s unsubsidized gamble pays off. The carrier’s Value Plans still require a two-year contract, and the lower prices of those Value Plans wash out if you’re forced to pay an additional $20 per month payments for your phone, since Value Plans tend to be exactly $20 per month cheaper than T-Mobile’s subsidized Classic Plans.

Legere said T-Mobile made the decision to ditch subsidies after noticing that 80 percent of its activations last quarter were for Value Plans, not Classic Plans. Of course, the company has been spent considerable time and energy to convince iPhone owners to bring their unlocked handsets to T-Mobile’s network, a priority that will no doubt change when the carrier offers Apple’s phone directly. Legere confirmed that the iPhone is indeed coming to his company in 2013, but didn’t say when. We wouldn’t expect to see a full roll-out until T-Mobile finishes upgrading its network to bring faster data speeds to the iPhone, which should be six months or so down the line. Currently, most iPhone owners only receive 2G speeds on T-Mobile.