T-Mobile US Inc. (TMUS), AT&T Inc. (T) and Verizon Wireless (VZ), touting their new installment-plan approach to mobile-phone pricing, will offer Apple Inc. (AAPL)’s iPhone 5C without an initial down payment.
T-Mobile will subsequently require 24 months of $22 payments, the Bellevue, Washington-based company said on its website. AT&T’s $22 installment plan will only last 20 months, though its service prices start at a higher rate. And Verizon is offering the 5C without a down payment and $22.91 per month over 24 months, according to its website.
The debut of the new iPhones, due in stores later this month, is putting a spotlight on the industry’s shift toward more flexible installment purchases, as an alternative to the subsidized $200 phone, with a 2-year contract . T-Mobile, the fourth-largest U.S. carrier, was first to adopt the approach earlier this year, seeking to stand out from its larger rivals. Verizon Wireless and AT&T then followed with similar plans.
“I think these plans are here to stay,” said Jennifer Fritzsche, an analyst at Wells Fargo & Co. in Chicago. “It’s very good for the carriers since it decreases their subsidy costs and takes some pressure off their hardware expenses.”
While T-Mobile no longer offers discounted phones tied to contracts, the other major carriers still offer the traditional method of subsidizing phones in exchange for two-year service plans.
The higher-end iPhone 5S will sell for $99 down and $22.91 a month at T-Mobile, while AT&T will offer it for zero down and 20 monthly payments of $27. Verizon hasn’t determined an installment plan price for the 5S yet. Verizon and AT&T will offer the iPhone 5S starting at $199 with a two-year contract.
While the total cost of buying the iPhone through AT&T, for example, is lower, T-Mobile aims to attract customers with its service plans. The company charges $70 a month for unlimited calling, text and data. AT&T, which no longer offers unlimited data, has a starting price of $80 a month, with caps on calling minutes and data.
T-Mobile shares declined 2.9 percent to $24.71 and AT&T fell 5 cents to $34.32 at 4:10 p.m. in New York. Verizon gained 0.9 percent to $47.76.
“This represents a significant moment for people to rethink who their carrier is and switch to T-Mobile,” said T-Mobile Chief Marketing Officer Mike Sievert. “People have been waiting, either because they are stuck in contracts, or waiting for the new iPhone.”
Sprint Corp. (S), the third-largest U.S. carrier, will offer both handsets starting Sept. 20 on a two-year service agreement. The cheapest model 5C will sell for $99.99 while the 5S will start at $199.99, the Overland Park, Kansas-based company said in a statement.
Apple unveiled the new iPhones this week, setting up the first four-way showdown among major U.S. carriers offering the device. T-Mobile became the last of the companies to get the iPhone this year.
T-Mobile is working to rebound from years of customer losses. In the second quarter, the company added 688,000 monthly subscribers, surpassing the 551,000 that Dallas-based AT&T gained. Fritzsche predicts that T-Mobile will add 425,000 subscribers in the third quarter -- double her original estimate.
With AT&T and Verizon imitating the installment plan, T-Mobile could be vulnerable, said Fritzsche.
“This could ultimately backfire on T-Mobile if the other carriers have success with it,” she said. “T-Mobile would lose its differentiation.”
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