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By Sinead Carew
NEW YORK, July 10 (Reuters) - T-Mobile US Inc saidon Wednesday that customers will be allowed to upgrade phonesevery six months and it unveiled a family plan for prepaidcustomers that it hopes will lure customers away from its threebigger rivals.
Verizon Wireless , AT&T Inc and SprintNextel Corp offer phone discounts in exchange for tyingcustomers to two year contracts and typically do not allow phoneupgrades during that period.
T-Mobile, which is under pressure to stem years of customerlosses, said it is already seeing good results from its effortsto differentiate itself from bigger rivals. Now, it is bettingpeople will switch to its service because they want to changephones more often than its rivals allow.
"You can upgrade when you want, not when you're told,"T-Mobile Chief Executive John Legere, who was appointed inSeptember 2012, told reporters and analysts at a New York eventwhere he announced the changes.
Legere told Reuters he expects the offer to improve customerloyalty and to increase the number of new customers T-Mobilelures from other carriers each quarter without having a bigfinancial impact on the company.
The No. 4 U.S. mobile provider also hopes to attract morecustomers who pay for calls in advance by offering a prepaidfamily plan that does not require a credit check.
It said its $100 monthly fee for a family of four is about$100 less than AT&T's service. It expects a lot of interest inthe service as it estimated that a third of U.S. families wouldnot pass the credit checks required for typical family plans.
AT&T and Verizon attribute much of their success inretaining customers to these plans because it is harder for anentire family to change service than an individual.
Customers who want frequent phone upgrades must sign on to aservice called Jump that requires them to pay a $10 monthlyinsurance fee on top of monthly service fees and a one-off downpayment that partially covers the cost of the phone. They arealso charged a monthly fee of up to $20 per month to pay for theremainder of the phone.
When T-Mobile customers want an upgrade, they can bring aphone to a store and swap it for a new device. They pay anotherdown-payment and resume monthly payments for that device. Themoves follows T-Mobile's elimination in March of long-termcontracts and handset subsidies.
T-Mobile will lose money in some cases if a customer tradesin a lower value phone for a more expensive one, according toChief Financial Officer Braxton Carter.
But he told Reuters this would likely be evened out by thefact that popular phones such as the iPhone can keep as much as70 percent to 80 percent of their original value after a 6-monthtrade in. The company will then sell those phones back tocustomers looking for a discount.
"We'll definitely attract more customers to our company byhaving this innovation," Carter said. "By attracting morecustomers, we're attracting more revenue and (better) margins.This is a greater retention tool."
The event on Wednesday was T-Mobile's first media functionsince it merged with MetroPCS in April.
Some analysts said the new plans could prove popular. ButAvi Greengart of Current Analysis questioned whether customerswould leave big providers because Verizon's network has a goodreputation and AT&T has a huge number of customers tied tofamily plans that are hard to leave.
However, Greengart said the move should make those companies"sit up and take notice."
T-Mobile also announced that customer defection rates are lower than ever because of new marketing efforts and theintroduction in April of the Apple Inc iPhone, whichaccounted for 29 percent of its smartphone sales in the secondquarter.
While the company would not disclose total customer numbersfor the second quarter, it believed it had added the most netcustomers of all the national U.S. carriers, at least in severalmajor U.S. cities. It cited strong customer growth compared withits rivals in cities such as New York, Los Angeles, Miami,Houston and Dallas.
T-Mobile shares closed 1.3 percent higher at $24.42 on theNew York Stock Exchange.
