By Sinead Carew
NEW YORK, March 26 (Reuters) - T-Mobile USA said on Tuesdaythat it will start selling Apple Inc's iPhone on April12, making it the last of the big national U.S. operators tosell the popular smartphone.
The No. 4 U.S. mobile provider, which is seeking to mergewith smaller rival MetroPCS Communications, is hopingthe device can help stem customer losses. The launch follows amarketing overhaul that eliminates device subsidies and two-yearservice contracts favored by its bigger rivals.
T-Mobile, a unit of Deutsche Telekom AG, hopesits new approach will differentiate it from bigger rivals thatalready sell the iPhone: Sprint Nextel, AT&T Inc andVerizon Wireless, a venture of Verizon Communications andVodafone Group Plc.
The company, which struggles with customer defections, hopesto attract cost-conscious consumers through an aggressivemarketing campaign that focuses on its lack of service contractsand clearly outlines the monthly cost to consumers to owndevices such as the iPhone.
U.S. operators have traditionally subsidized phones inexchange for tying customers into contracts but do not disclosehow much of their monthly charges covers the device, a practicethat T-Mobile USA criticized as lacking transparency.
"The industry's broken," T-Mobile Chief Executive JohnLegere said at a press event to announce the iPhone launch anddiscuss the service plans, which he promised late last year.
In particular, T-Mobile USA is taking aim at No. 2 U.S.operator AT&T because the two companies use the same networktechnology, making it easier for consumers to bring their AT&Tphones to T-Mobile's network.
Legere estimated that T-Mobile customers would pay about$1,000 less over two years than they would for roughlycomparable services at AT&T. T-Mobile's website also directlycompares its pricing to AT&T's service fees.
However, AT&T appeared unfazed by the campaign. SpokesmanMark Siegel's response was: "Whatever."
Legere said that the iPhone and the new marketing plans willhelp the company stem its losses of bill-paying customers thisyear and create growth in this segment in 2014. The company,which ended 2012 with 33.4 million customers, lost 515,000contract customers in the fourth quarter.
"You'll see discernable progress each quarter," theexecutive told Reuters, promising significant improvement infirst quarter from the fourth quarter and second quarter numbersthat are significantly better than the first quarter.
T-Mobile will offer the iPhone 5, Apple's latest model, foran upfront payment of $99.99 followed by 24 monthly payments of$20, adding up to $580 over two years. Its rivals charge $200upfront to customers who sign a two-year contract, but customerswho do not sign a contract pay about $650.
Slight differences in operators' service plans makecomparison of total costs for consumers difficult, but analystssaid that T-Mobile's offer does appear to be cheaper than thoseof its bigger rivals.
Reticle Research analyst Ross Rubin said it was stillunclear whether consumers have as much disdain for contracts asT-Mobile hopes. But he said consumers will likely find the lowerupfront cost for phones attractive and that the addition of theiPhone should help T-Mobile retain customers.
"Not having the iPhone 5 was certainly a big hole in itsportfolio," Rubin said.
T-Mobile said it will sell the older iPhone 4 for a $69up-front payment and a commitment to pay $20 a month for twoyears. It also promised smaller upfront fees for the latestsmartphones from BlackBerry and HTC Corp.
Bigger rivals AT&T and Verizon have said they would closelywatch T-Mobile's new service model and that they could followsuit if it proves popular with consumers.
Andrew Sherrard, T-Mobile's senior vice president ofmarketing, said the company would significantly increase itsmarketing spending, but he declined to give details.
T-Mobile also said on Tuesday that it had upgraded itsnetwork with faster data services in seven markets using theLong Term Evolution (LTE) technology that its bigger rivals have a head start in delivering.
T-Mobile promised to offer LTE in markets with a populationof 100 million by mid-year and expects to broaden coverage to200 million by year end.
One key element of Legere's strategy involves the proposedmerger with MetroPCS, which needs shareholder approval at aspecial meeting on April 12, the date of T-Mobile's iPhonelaunch.
Two large activist shareholders, Paulson & Co Inc and P.Schoenfeld Asset Management, are campaigning to block the dealdue to the level of debt that the combined company will have onits books. But Legere insisted the merger would go through.
"It will be approved despite ... several greedy hedge fundsthat are trying to take a double-dip out of that process,"Legere said.
Vodafone (VOD)
