Larger carriers copying T-Mobile's subsidy cuts; carrier's parent reports earnings Wednesday

Larger carriers copying T-Mobile's subsidy cuts; carrier's parent reports earnings Wednesday
On the eve of T-Mobile parent Deutsche Telekom's earnings, a survey of analysts shows that the carrier probably lost 346,000 contract subscribers for the latest quarter. That is a slight improvement from the 510,000 contract subscribers the carrier lost in the prior quarter. But some analysts see pressure on U.S. carriers to increase their profit margins and to that end, T-Mobile has been the most outspoken about cutting back subsidies on new phones. More on that later. In the meantime, it is expected that T-Mobile USA's EBITDA (a measure of cash flow) probably rose 7.5% in the last quarter to 959 million EUR ($1.18 billion USD) according to a consensus of analysts. The improvement is expected thanks to the lower number of defections and the stronger dollar. T-Mobile USA is currently led by Jim Alling, a former Starbucks executive who replaced Philipp Humm after the latter joined Vodafone in June.

In the first quarter, T-Mobile's cost of handset subsidies dropped 42% to $310 after the nation's fourth largest carrier made some changes which saw the Samsung Galaxy S III, the most popular smartphone current available, cost $80 more for T-Mobile customers. And while this could be a deadly game T-Mobile is playing, other carriers have slowly come around to its way of thinking. AT&T has recently doubled its upgrade fees to $36. In April, Verizon added a $30 upgrade fee, and Sprint charges $18 for an upgrade plus an additional $10 monthly for smartphones. Meanwhile, without the Apple iPhone in its lineup, and with subsidy cuts, T-Mobile is looking at a 9.5% drop in contract customers over the last two years.

Not everyone is convinced that cutting subsidies is the way to go. With the next iteration of the Apple iPhone expected to be introduced next month, a little competition is all that it would take for Verizon, AT&T and Sprint to start paying more for new phones again. They would leave T-Mobile all by its lonesome without the Apple iPhone, charging customers more for new phones, and losing more contract customers.

source: Bloomberg

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34 Comments

1. cheeseycheeser

Posts: 413; Member since: Mar 24, 2011

Just as long as they don't start charging $700 for a new phone. Anything below $300 will probably be fine for the American customer. But even they save money in the long run, $200 phone + $80 service will always beat out $700 + $45 for Americans.

10. networkdood

Posts: 6330; Member since: Mar 31, 2010

Well a new phone, an iphone, without contract is 849.99 for the 64GB iphone 4S - biggest ripoff ever. Apple makes its money through its service plan and selling the 32GB and 64GB models for 299 and 399 on two year contracts, respectively.

2. khmer

Posts: 95; Member since: Jun 21, 2012

T-Mobile Galaxy S3 $200 down payment and $20/month for 20 months=$600 at T-Mobile Store is chasing away new customers and upgrade customers. T-Mobile online is $600-320 = $280 with 2 years contract.

4. lubba

Posts: 1313; Member since: Jan 17, 2011

They are hideous for their prices. Their mail in rebate crap just pisses me off. Takes so long to get and you're actually paying half the phone price for an upgrade. At least though their plan price is decent. Sometimes I wonder if this and their phone products they offer are the cause for their loss, like customers running to ATT for the Lumia 900, one x, and iPhone.

6. remixfa

Posts: 14605; Member since: Dec 19, 2008

if you run to ATT for a cheaper phone, your an idiot. You may save 50 or 100 on an ATT phone.. sometimes.. but your going to be paying THOUSANDS more for the contracts. People need to do the math and quit having knee jerk reactions.

17. -box-

Posts: 3991; Member since: Jan 04, 2012

Better AT&T than Verizon, what with the required unlimited plans now

25. lubba

Posts: 1313; Member since: Jan 17, 2011

I don't think it's just the cheaper phones. Its the phones themselves.

7. remixfa

Posts: 14605; Member since: Dec 19, 2008

the first one you mention is the value plan. It comes with a $60 unlimited everything w/ 2 gig data before throttle.. or $80 with 5 gig & tether The second one you mention is for the classic plan. Its a regular contract plan like all other carriers so the phone is cheaper but like all other carriers you pay more for the contract. $80 and $105 (i think) for the same 2 plans. The first deal is CHEAPER up front and CHEAPER over all. The website needs serious work to make both plans easier to access but you can get the Value online as well.. its just confusing to get to,even for someone that knows that they are looking for. education..education..education..

14. networkdood

Posts: 6330; Member since: Mar 31, 2010

Speaking of education, I notice a lot of readers do not believe in it.

20. meowcenary

Posts: 187; Member since: Apr 13, 2012

I did, I jumped ship from Sprint to MetroPCS in April 2012. From May through June, my MetroPCS experience was Foxtrot Alpha. So in July I jumped ship to T-Mobile value plan (Unlimeted Talk, SMS, MMS, and 5 GB data). With the plan not providing a phone, I brought a HTC Radar 4g (New) for 270USD.

24. lubba

Posts: 1313; Member since: Jan 17, 2011

Alot of people I work with don't believe anything tmo. I totaled out the price on 5 lines, two 5gigs and the rest 2gigs. That's a total of 16gig data plan with unlimited family txt messaging for less than $300. I compared my plan to theirs even if they have employee discount, I had more gigs and saved more money! Yet they dont get it. They all have iPhones by the way and they're either on ATT, Verizon, or sprint. I'm assuming it has to do something with iphone. Dumb!

29. remixfa

Posts: 14605; Member since: Dec 19, 2008

yup, I got 3 lines, 2 with 5 gigs + tether for both, and a regular line, unl text and 1000 mins to split (we text, not talk), and I pay what.. $100 a month before taxes? Good luck getting that plan on VZW/ATT or Sprint. And except for certain spots at the college, I almost never lose signal. In fact, at the hospital I do clinicals at, I have full 4g while my VZW friends have spotty to no coverage. It's all about where you are located for who is the best.

26. alpinejason

Posts: 262; Member since: Sep 06, 2011

do not believe in it or just do not how to spell anything or just abbreviate everything because they are too lazy to hit a couple of extra buttons at the expense of making themselves look like a complete retard.also who wants to look at all that crap trying to figure out what the hell they are talking about/said.

30. Hunt3rj2

Posts: 396; Member since: Nov 11, 2011

Guess what you could do? You could go to T-Mobile prepaid. Take the hit on a more expensive phone, get a 30 dollar a month plan with 5 GB of DC-HSPA+, unlimited text. It doesn't even matter if it only has 100 minutes when you can easily use SIPDroid and Google Voice together to completely replace circuit switched phone calls. Compared to as much as 100 dollars a month for plans on Verizon, you can save enough money to buy 5 Galaxy Nexuses and still save money. I also forgot to say that with SIPDroid and Google Voice, you can use your existing number to both make and receive calls, and it would operate JUST like a normal phone.

32. remixfa

Posts: 14605; Member since: Dec 19, 2008

yes.. yes you could most definitely do that. :) If it wasnt slightly cheaper for us to be on the shared plan, that's where I would be.

33. tmobileguy

Posts: 1; Member since: Sep 01, 2012

you are a idiot, let me break this down for you (Galaxy 3) Classic Plan is 80 a month x 24 months = $1920 Value plan is 60 a month x 24 = $1440 Classic plan phone is 280 after mail in rebate upfront with NYS tax = $356.40 Value plan phone is 600 or 200 down with NYS tax = $248. so now we do the math Classic plan = 1920 over two year and phone is 280 = $2200 Value plan = 1440 over two years and phone 600 = $2040 Which is cheaper??? Value plan even with the break of up of the phone is 1) cheaper upfront 2) cheaper monthly 3) cheaper over the two years A smart consumer understands this. All of the US is stupid because you get your "FREE PHONE" or what ever and the phone is broken up in the plan and then you end up paying more then its worth in the long run.

3. aikonix

Posts: 60; Member since: Apr 08, 2012

Corrections Alan F.... Sprint charges $36 for activation upgrade fees. Just sayin...

19. 305Bucko

Posts: 506; Member since: Aug 07, 2011

Yes I was gonna say the same thing. Sprint has been charging $36 for upgrades since the end of 2011/early 2012.

21. MISTER.H

Posts: 167; Member since: Aug 03, 2012

Here in the UK carrier's don't charge for an upgrade. S3 OneX and high-end phones are on £45 and above along with unlimited Xnet minutes.

34. 305Bucko

Posts: 506; Member since: Aug 07, 2011

thats fantastic...

5. remixfa

Posts: 14605; Member since: Dec 19, 2008

what a bad comparison 1) your missing non contract additions to create a net +/- TOTAL subscribers for T-Mobile. They push very hard on NON contract plans to increase EBITA. they may or may not still be negative over all, but its a very important part of their business. 2) the SGS3 is $80 more than at ATT/VZW, but the PLAN costs you $80 vs $130 = $50 A MONTH SAVINGS... which is way way way cheaper than saving $80 up front. And if you go with Value the plan is $60 because the phone is full cost spread over time. Or if you dont mind paying it out right, you can get the same prepay plan for $60. Why do that? Because prepay has CHEAPER taxes by far (in fl its 22% plan vs 7% prepay taxes). And since you can get insurance on prepay and lose no actual benefits other than amortizing the phone over 20 months. Unlike other carriers, TMobile prepay customers get the WHOLE network, not just parts of it like ATT/VZW/Sprint do. if you can front the whole sum for the phone, it saves you EVEN MORE than plans on Tmobile or elsewhere. It REALLY IRKS me when people do shoddy comparisons or miss major components of the comparison.

13. networkdood

Posts: 6330; Member since: Mar 31, 2010

Remix, AT&T gives its customers the entire network - but, data cost even more on a prepaid plan than on a regular plan. Best way around this is to get a phone that is not recognized by AT&T's billing/network system. The phone will get around 5 Mbps max, but you can use a 10.00 unlimited smartphone plan instead of paying 20.00 or more.

18. -box-

Posts: 3991; Member since: Jan 04, 2012

Remix, you're a great debater and you make wonderful points, and I enjoy reading your posts. But please, please, use the right words. Your (possessive) =/= you're (you are)

28. remixfa

Posts: 14605; Member since: Dec 19, 2008

lol, im dyslexic. If auto-correct doesnt catch it, I cant be held responsible. :) You DONT want to see the mess that I'm actually typing.. lol

8. nexumus

Posts: 19; Member since: Apr 09, 2012

There is an error in this article, Sprint doubled their upgrade fee to $36 about a year ago.

12. networkdood

Posts: 6330; Member since: Mar 31, 2010

This is the price you pay when you deal with the DEVIL (apple) - AT&T started it - who will end it? The customers?

15. MeoCao unregistered

It's unwise for Tmo to do it, they should allow people to choose. But if all carriers cut subsidy I think iPhone is biggest loser.

16. networkdood

Posts: 6330; Member since: Mar 31, 2010

So far, APPLE is the winner - they are raking in more dough than all other carriers, probably combined. AT&T and others have been forced to recoup subsidy losses by getting back at their own customers. In summary: APPLE is the big winner Customers are the loser All of this hoopla over an inferior product that at one time was innovative and did change the smartphone landscape, now just an ordinary smartphone.

22. MISTER.H

Posts: 167; Member since: Aug 03, 2012

Very well said networkdood! +1 from me.

23. meowcenary

Posts: 187; Member since: Apr 13, 2012

Well Apple is not the only winner. The Telecom providers are winners too. Not a one person, would vote with your collective wallets when it comes to the so called Bravo Sierra that they call unlimited and the taxes we eat.

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