T-Mobile USA To Scrap Lengthy Contracts

burning contract on fire © Valeriy Lebedev Shutterstock

T-Mobile USA announces plans to abandon contracts, introduce the iPhone and rollout an LTE network

T-Mobile USA has announced that customers will no longer have to sign lengthy contracts to use its services, with users purchasing their price plans and smartphones separately.

Most carriers offer handsets at a heavily subsidised price on the condition that users sign a contract lasting anywhere between 12 and 24 months, meaning that they are unable to upgrade their devices until that agreement has expired.

Operators are also unclear about what proportion of their monthly charges cover this subsidy, a practice that T-Mobile says is confusing and lacks transparency.

T-Mobile USA contracts

T-Mobile USA“These bold moves serve notice that T-Mobile is cancelling its membership in the out-of-touch wireless club,” said John Legere, president and CEO of T-Mobile USA, Inc. “This is an industry filled with ridiculously confusing contracts, limits on how much data you can use or when you can upgrade, and monthly bills that make little sense. As America’s Un-carrier, we are changing all of that and bringing common sense to wireless.”

T-Mobile will instead offer just one price plan, with users able to add various add-ons and purchase the latest smartphones whenever they want or even use an existing unlocked handset. Customers will be given the option to pay for handsets in interest-free monthly instalments, meaning that they might not be completely free of monthly obligations.

The Simple Choice Plan offers unlimited voice minutes, texts and Internet access, along with 500MB of ‘high speed data’, for $50 per month, with a second line costing another $30 and each additional line thereafter costing $10. An extra 2GB of high speed data is $10 per month per line and unlimited data is an additional $20.

US mobile market

In the UK, operators generate the majority of their revenue from voice and text traffic, but in the US, income is largely derived from data-focused price plans. With this in mind, T-Mobile has also agreed a deal to stock the iPhone and will also begin rolling out an LTE network across seven major cities.

T-Mobile LTE will initially be available in Baltimore, Houston, Kansas City, Las Vegas, Phoenix, San Jose and Washington DC and will reach 100 million people by the middle of 2013 and 200 million by the end of the year.

T-Mobile is the US’s fourth largest operator and hopes that its new approach will differentiate it from its rivals and expand its market share in the country. Central to its strategy is the takeover of smaller rival MetroPCS Communications, which should be completed in the near future.

AT&T attempted to buy T-Mobile from Deutsche Telekom in 2011 for $39 billion (£25 million), but the bid was abandoned following concerns from US regulators and rival operators about the impact of such a deal on competition.

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Originally published on eWeek.