January 9, 2014
CES 2014: T-Mobile To Pay New Customers’ Early Termination Fees
Enid Burns for redOrbit.com - Your Universe Online
Cell phone carriers get you locked in with their two-year contracts, and make it difficult to switch carriers, especially for families with staggered renewals. In its latest "Un-Carrier" move, T-Mobile USA announced at the 2014 International CES that it would pay early termination fees of up to $650 per line for families and groups that make the move. The new plan is loosely dubbed "Un-Carrier 4.0.""We're giving families a 'Get Out of Jail Free Card," said John Legere, president and chief executive officer of T-Mobile, in a corporate statement. "Carriers have counted on staggered contract end dates and hefty early termination fees to keep people bound to them forever. But now families can switch to T-Mobile without paying a single red cent to leave them behind."
The newest changes to the "Un-Carrier" plan, and T-Mobile's strategy to sign up more subscribers, was speculated about in December when invitations were sent to media for a press event at CES, and T-Mobile USA CEO John Legere tweeted that the Un-Carrier 4.0 announcement would be big. Industry insiders filled in the blanks, predicting that the carrier would offer a credit to users who had to pay termination fees for getting out of competitor carrier contracts. The new strategy was developed under the project, codenamed "Houdini."
T-Mobile cited Nielsen research, saying that up to 40 percent of families hold back from switching carriers due to early termination fees. The carrier further cited a GigaOM study that finds 78 percent would switch to T-Mobile if their early termination fee was paid.
While T-Mobile says it will pay up to $650 per line, most users will see $350 or less per line covered when they switch to T-Mobile, depending on what the competing carrier charges for a termination fee based on the contract terms.
"Carriers like to make you think you're just signing up for two years with their family plans, but with staggered expiration dates and early termination fees, they're really locking you in forever," said Mike Sievert, chief marketing officer for T-Mobile, in a corporate statement. "Now, families are free to switch without worrying about early termination fees. And by switching to T-Mobile, a family of four can save $1,880 over two years compared to an AT&T shared family plan."
Families and other groups -- such as small businesses -- are attractive subscribers because they carry multiple lines and services, and are often difficult to get to switch carriers.
"We have seen companies like AT&T mobility and Verizon Wireless introducing their plans for letting customers combine their wireless data services into a single account for more control and better economics. This has been a big success," industry analyst Jeff Kagan told RedOrbit.
The strategy offers advantages, and lessens a hold that other carriers have had on family subscribers.
"The economics and control are better for the customer, and the ability for the carrier to hang on to the customers because of combined service increases," said Kagan. "This creates a stickier customer who is much more difficult to win by one of the competitors."
New T-Mobile customers will have a procedure to follow in order to get their fees paid by the carrier. Customers will be required to hand in their eligible devices at a T-Mobile location and switch to a postpaid Simple Choice Plan to receive an instant credit of up to $300 based on the value of their phone. After customers get their final bill from their old carrier, which will show an early termination fee, they will need to upload a copy of the bill to www.switch2tmobile.com or mail in a copy of the bill. T-Mobile will send additional payment of up to $350 per line to cover the fees.
While the announcement that T-Mobile will cover early termination fees was the big news of the conference, Legere rebuffed rumors that the US unit of T-Mobile would be acquired by Sprint, according to a ZDNet report.
So T-Mobile, as well as Sprint, will continue to trail the leaders in the mobile carrier space. Even if the companies did merge, their combined base would still follow Verizon Wireless and AT&T Mobility, ZDNet said.