Is This the $99.99 Deal That Saves Apple?
A new carrier could be just what Apple 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, 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 , Verizon , and even Sprint Nextel 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.
AT&T Individual 5GB
Verizon Share Everything 4GB
Sprint Simply Everything
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. 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.
Apple is in a fight for its life
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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. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.