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T-Mobile switching to Value Plans and phasing out subsidies

News by Andrew Kameka on Thursday December 06, 2012.

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T-Mobile USA will end its longstanding practice of subsidizing smartphones for customers who sign-up for a Classic two-year agreement. Following today's announcement that it will begin selling Apple products next year, the fourth-largest carrier in the U.S. said it will switch to Value plans that lower the payments customers make each month but do not offer deals on device costs.

The elimination of Classic plans effectively means the end of subsidies, the practice carriers use to attract long-term business by offering a phone to customers for less than its full retail value. A phone might retail for $650, but a carrier will only charge the customer $199 in order to make money through monthly service plans. The high costs of subsidizing the Apple iPhone has been cited as a reason T-Mobile failed to offer the device previously, but it appears that Value Plans will be the way that the carrier manages to deliver the iPhone next year.

Customers at T-Mobile will not always have to pay full price for a new plan because T-Mobile will continue offering its Equipment Installment Plan (EIP). An EIP requires only that a customer pay a portion of the phone's cost and then pay the remaining balance in installments divided over a 20-month period. If a phone costs $650 for full retail price, a customer might pay $150 upfront and then pay an additional $25 per month for 20 months.

T-Mobile has offered Value plans as a way to encourage customers who wish to save on monthly costs by paying more upfront, but EIP will remain an option for customers who cannot afford to pay full price. T-Mobile customers who already have a Classic plan will continue to use their existing plan, but that may change in the future when it comes time to renew or upgrade to a new device. T-Mobile currently says it will have "more information to share in the coming months" regarding the transition away from Classic plans.

via: TmoNews

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Andrew Kameka
Andrew is based in Miami, Florida.

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