A new carrier could be just what Apple Inc. (NASDAQ:AAPL) needs to grow its market share.
Deutsche Telekom unit T-Mobile T-Mobile began selling the iPhone 5 over the weekend, and initial reports on Friday were encouraging. Online reports showed some T-Mobile stores busy with customers taking advantage of T-Mobile’s new relationship with Apple Inc. (NASDAQ:AAPL), and that’s more than what can be said for some of the new smartphones that have hit the market recently.
Healthy interest in a device released half a year ago is a welcome surprise. It’s also a bit of a shock, given the flimsy value proposition of the iPhone 5 on T-Mobile. T-Mobile’s advertised price of $99.99 for an entry-level iPhone 5 — half of the retail price of the smartphone through larger carriers — is actually just a down payment. The deal requires zero-interest financing approval, as customers are expected to pay $20 a month for the next two years. That adds up to $579.99 in capital outlays over two years, far more than the $199.99 that iPhone 5 buyers are shelling out on larger carriers. Even customers who can whittle down the initial down payment to zero through a trade-in will pay far more for the iPhone 5 itself.
T-Mobile’s marketing claim is that it doesn’t tie customers to annual contracts, and that’s why it’s not willing to subsidize the cost of a new smartphone. Is it ironic that the “Un-carrier” that disses long-term contracts is tethering customers to two-year financing deals? Yes, but let’s not forget that the T-Mobile deal gets far more attractive when you compare T-Mobile’s lower monthly rates with what AT&T Inc. (NYSE:T) , Verizon Communications Inc. (NYSE:VZ) , and even Sprint Nextel Corporation (NYSE:S) are charging.
T-Mobile’s Simple Choice Plan offering iPhone 5 owners unlimited talk, text, and Web for $50 a month is a pretty sweet deal. It’s only $80 a month for two devices, and just $10 more a month for additional lines in a family plan.
Of course, there’s a catch. The basic plan includes only 500 megabytes of high-speed data a month before bumping users down to serviceable but slow 2G speeds. Customers can pay $10 a month more to have 2.5 gigabytes of high-speed data a month, or $20 a month for unlimited 4G connectivity.
T-Mobile argues that this is still a superior deal. Even with someone paying $20 a month for the iPhone 5 and another $20 a month for the unlimited nationwide 4G plan, $90 a month is still less than comparable plans.
| Plan | Monthly Rate | Savings | Annual Savings |
|---|---|---|---|
| AT&T Individual 5GB | $139.99 | $49.99 | $599.98 |
| Verizon Share Everything 4GB | $110.00 | $20.00 | $240.00 |
| Sprint Simply Everything | $109.99 | $19.99 | $239.88 |
Source: T-Mobile website.
The larger carriers will argue that there are advantages to paying hundreds more a year to be on their networks, but at least there’s a value proposition to T-Mobile’s offering after all.
The big winner, of course, is Apple Inc. (NASDAQ:AAPL). Having the iPhone 5 available on T-Mobile is incremental at a time when the market’s worried about its ability to hang on to its market share.
The article Is This the $99.99 Deal That Saves Apple? originally appeared on Fool.com.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple.
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