T-Mobile to Target AT&T Customers With iPhone Sales in 2013

By Wayne Rash  |  Posted 2012-12-06

T-Mobile to Target AT&T Customers With iPhone Sales in 2013

T-Mobile USA, the nation’s fourth largest wireless carrier, and the only one without Apple’s much desired iPhone, has reached an agreement to start selling the hugely popular smartphone in 2013.

This announcement, which first appeared as a minor point in a Deutsche Telekom financial statement released early on Dec. 6, was confirmed by T-Mobile USA CEO John Legere in a presentation in Bonn, Germany later in the day.

Legere also announced that T-Mobile has significantly moved up its roll-out of its LTE network and the refarming of its HSPA+ network. Legere said that T-Mobile will have “150 million POPs” by mid-2013. By that he means that the LTE network will cover that many people, which makes all of them potential customers. He also said that by the end of 2013 that number will grow to 225 million. The implementation of LTE is seen by many analysts as being critical to launching the iPhone 5, which includes support for LTE Band 4, which is what T-Mobile is rolling out.

“A certain number of customers wouldn’t come to the store if we didn’t have the iPhone,” Legere said in his presentation. “And that’s not a matter that they would buy it, but there was an incredible number of churn. We worked very hard for a deal that made sense for us.”

Legere noted that the DT’s 2013 financials do include the full impact of rolling out the iPhone in 2013. Legere said that T-Mobile will be rolling out Value Plans at about the same time as the iPhone in 2013, making the revenue impact “almost neutral.” Legere said that the T-Mobile’s approach was very different from what’s happened previously and well worth the strategic wait for the iPhone agreement.

“This is not a volume commitment of the type that Sprint agreed to, or anything close to it,” Legere said. “When this device rolls out, it will be a dramatically different experience,” he said, indicating that the actual rollout wouldn’t be for a few months yet.

The iPhone rollout is important to T-Mobile, but it’s only part of the company’s growth strategy. Network modernization is also a key part of the T-Mobile strategy. T-Mobile’s plan includes new radios in towers that lower cost and improve efficiency, the move to 1900 MHz for HSPA+, and the launch of LTE.

While T-Mobile hasn’t said when the rollout of LTE is going to start, if the company is going to meet its mid-year goals, the launch of LTE will have to begin early in 2013. This will be critical for two groups of customers. Existing iPhone 5 customers will be able to begin using LTE much earlier than expected.

T-Mobile to Target AT&T Customers With iPhone Sales in 2013

In addition, MetroPCS customers, who already have LTE service, will be able to start using T-Mobile’s LTE much sooner than previously expected. On another note, T-Mobile executives did confirm that the MetroPCS CDMA network would be decommissioned as soon as existing customers could be migrated to GSM/LTE handsets.

Effectively T-Mobile has solved the wireless carrier “chicken and egg” problem. Carriers and device manufacturers have always been reluctant to incorporate devices and networks that weren’t fully compatible. This is why T-Mobile USA hasn’t been selling iPhone. T-Mobile’s data networks weren’t compatible except at slower 2G speeds.

But by refarming its 1900 MHz HSPA+ spectrum, which the iPhone can use as can most T-Mobile phones, and then launching LTE aggressively the company has made it possible for Apple’s iPhone to work normally. The opened the door to striking a deal with Apple to sell the iPhone. But there’s more. During his presentation Legere said that T-Mobile will be aggressively targeting AT&T customers to attract them to T-Mobile.

To accomplish this, Legere said that T-Mobile will be creating a different kind of environment for wireless customers. Legere said that wireless customers are irritated by high bills, contracts that lock them in and difficulty in upgrading their devices. He said that T-Mobile was launching Value Plans, which let customers bring a device to the company and get very low-cost service.

He also said that T-Mobile would sell devices and provide financing which in turn would let customers get the phones they want at an out-of-pocket cost lower than what a traditional plan would cost. Legere also said that customers will be able to upgrade their devices at any time and that T-Mobile will take trade-ins.

The net result, from what Legere disclosed in his presentation is that customers would be able to make a low down payment for what he called “an iconic device” of $99 and pay for it for 20 months for “15 or 20 dollars a month.” What this probably means is that T-Mobile will start selling iPhones 5s at their full price, but offering financing and a value plan. Legere said that T-Mobile will be switching to 100 percent Value Plans in 2013, which means that when the iPhone sales start, they’ll be sold without a contract.

But there’s more to come in 2013. T-Mobile will start selling non-contract iPhones, but it’ll also start attacking AT&T. “You love your iPhone, you hate AT&T,” Legere said, describing a new campaign. So there will be an iPhone for T-Mobile customers, and there will be better coverage, and lower prices. This in itself will shake up the traditional high-cost, slow moving mobile market in the U.S. It’s about time.

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