T-Mobile USA has launched a $70-a-month no-contract offer that promises an “unlimited nationwide 4G data” service to customers.
Unveiled at this week’s Consumer Electronics Show in Las Vegas, the deal follows T-Mobile’s announcement last month that it would stop subsidising smartphones in 2013.
Under new arrangements, customers will be required to pay substantial upfront fees for their devices, but will benefit from much lower monthly tariffs.
T-Mobile (Bellevue, USA) already offers no-subsidy contracts under its “Value” plans, which account for 80% of current contract activations in its stores.
It also provides the unlimited 4G offer to contract customers, claiming that 46% of new subscribers opted for the plan in December, and the launch of a no-contract option forms part of its campaign to win upmarket business at the expense of bigger rivals Verizon Wireless (New York, USA) and AT&T (Dallas, USA).
“We’re directly confronting the frustrations of American consumers fed up with the cost, complexity and congested networks of our competitors,” said John Legere, the chief executive of T-Mobile USA. “What this means is simply that T-Mobile customers are going to be able to enjoy everything a 4G smartphone is actually designed to do without limits and without a term contract.”
While T-Mobile lost 2.3 million contract customers between the third quarters of 2011 and 2012, it has flourished in the prepaid segment, adding 1.1 million subscribers over the same period.
The operator had 20.8 million contract customers and 5.7 million prepaid ones at the end of September 2012.
It remains bullish about the prospects for prepaid growth at a time when most operators are focused on the more valuable contract segment.
At the Capital Markets Day of parent company Deutsche Telekom (Bonn, Germany) in December, T-Mobile produced a forecast by Ovum, a market-research company, showing the prepaid market will gain another 50 million customers over the next five years, giving it a total of 129 million in 2017.
Ovum expects the contract market to grow at more modest pace over the same period, gaining 35 million customers to end 2017 with 324 million altogether.
A big question is whether consumers will be willing to fork out the substantial upfront device fees that T-Mobile is charging.
With the no-contract, unlimited 4G plan, the LG Optimus L9 – for example – will set a customer back by $199.99.
At $70, the monthly service fees also look on the high side in comparison with current levels of spending.
Last quarter, for instance, AT&T reported that its average revenue per contract customer was $65.20 a month.
In another announcement, T-Mobile said its 4G HSPA+ service was now available to 126 million people in the 1900MHz spectrum band – compatible with Apple’s iPhone.
The operator also confirmed plans to make LTE services available to 100 million people by the end of June and 200 million by the end of the year.
LTE services are already widely available from Verizon Wireless and AT&T, and T-Mobile is racing to catch up.