. And it's pulling out all the stops marketing-wise to convince customers it's different than traditional wireless carriers.
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Let's break this story down into three sections: Implications for T-Mobile and Apple and then a rerun of the math to see if you really get a better deal by ditching the big three.
To be clear, other than adding iPhone to its stable, this is nothing new for T-Mobile. It's basically looping the iPhone into the mix with the smartphones it already offers. As I'll detail in the math section, that's merely a "no-contract," pay-almost-full-price-for-your-device installment plan.
Absolutely excellent marketing, but probably less of a game changer than I initially thought. But that doesn't mean this isn't a big deal.
This shakes up the industry in a significant way. Apple's acceptance of T-Mobile's installment plan signals yet another shift in the way the company does business. I have to think that before Apple signs off on giving T-Mobile iPhone, it approves how it will be presented and sold to the consumer.
Make no mistake about it -- alongside existing deals on iPhone 4 and 4S -- this is the 'cheap iPhone' we have been hearing rumors about. Or at least it better be. Because
a "cheap iPhone" would be absolutely awful news for Apple
So if Apple is going to go "cheap," it might as well do it in a way that will not impact its margins much, if at all. I presume T-Mobile pays Apple the same way every other carrier does, except the "un-carrier" will make back that upfront cost direct from the installment plan, not via monthly usage charges.
This represents a compromise by Apple, but it definitely will not dilute its brand image like offering a $100 or $200 phone made of plastic would.
So here's the math, as compared to buying an iPhone 5 via
For the phone, you pay Verizon $199. That's it. With T-Mobile, you put $99 down and pay $20 each month over 24 months, bringing the total cost of the device to $579.
For a one-line plan with 2GB of data and unlimited voice and text, you'll pay $100 a month on Verizon ($40 for the line and $60 for the data plan) and $80 a month with T-Mobile ($50 for unlimited talk/text, $10 for the 2GB data plan and $20 a month for the smartphone).
Total cost for the plan over two years on Verizon equals $2,400 plus $199 up front for an iPhone 5. You're looking at $2,599.
Total cost for the plan over two years at T-Mobile comes to $1,920 plus the $99 iPhone 5 down payment. That comes to $2019.
Total savings: $580 at T-Mobile over Verizon.
And, of course, at the end of two years, you have paid for your phone and no longer have to shell out $20 a month. It's reasonable to believe, however, that that's not much of a perk for most of us who prefer -- and quite possibly require -- a new phone at least every couple years.
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While it sounds great to say you have no contract, you, in effect, do. You're on an installment plan for the phone. You make the down payment of $99 and then you owe T-Mobile $480 for the iPhone 5 it sold you.
Want to skip out early, you need to pay off the remaining installments. So, how is this not a contract? From that perspective, it's hardly any different than the predicament you're in with Verizon,
. Granted, if you bail from a traditional contract, you'll pay more.
As much as I hate to admit it, I recently escaped from an AT&T three-line contract with roughly one year remaining. That set me back $647.32. That's quite a bit more than the $220 you would pay to get out of your
it's not really a contract
with T-Mobile after one year.
If T-Mobile improves its network by expanding 4G LTE (
because there's nothing like the experience I have daily with Verizon's 4G LTE) and comes through with a trade-in/resale program so users have versatile upgrade options, this news could really change the game.
At this point, however, T-Mobile does save you money, but it's still a contract and the experience won't be quite the same -- warts and all -- as it is with AT&T, Verizon or Sprint.
Written by Rocco Pendola in Santa Monica, Calif.
Rocco Pendola is
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