Be wary of T-Mobile's audacious new wireless plan

But be thankful for how it's changing the game

(Image credit: (David Becker/Getty Images))

Remember those black-and-white commercials of the kindly looking wireless company CEO walking through New York in an overcoat, classical music playing soothingly in the background, gently explaining why his company's offerings are superior to those from the top two U.S. wireless giants, Verizon and AT&T? Yeah, that's wasn't T-Mobile.*

John Legere, T-Mobile's chief executive, is known more for his expletive-laced presentations and for crashing — then getting thrown out of — rival AT&T's big party at this year's Consumer Electronics Show in Las Vegas. But the self-styled bad boy of the wireless industry made his biggest splash on Wednesday, when he crudely belittled his competitors while making America's smartphone owners an offer he hopes they can't refuse: T-Mobile will take all the pain out of leaving your old carrier.

That's the promise, and here's how it's supposed to work: Starting today, if you are under contract with Verizon, AT&T, or Sprint, T-Mobile will pay for you to break that contract, offering up to $350 per line for your early termination fee (ETF). There's a catch, of course: You have to give up your phone and buy a new one from T-Mobile, but the No. 4 U.S. carrier is sweetening the pot by offering to buy your old phone for up to $300, depending on the model and its condition. That's up to $650 a person to join T-Mobile.

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This may not, in fact, be a great deal for you. First of all, many ETFs exceed $350. And while T-Mobile has largely done away with the dreaded two-year contract, in exchange it has also dropped the subsidized smartphone. Let's say you have a 32 GB iPhone 5 with Verizon; T-Mobile will give you $214 for your phone, but you'll have to spend $700 to buy a new 32 GB iPhone 5s (or $600 for an iPhone 5c). Or you have an HTC One with AT&T: T-Mobile will pay you $138 for your old one and charge you $600 for a new One.

If you have good credit, T-Mobile will let you buy your new, unsubsidized phone in interest-free monthly installments. But whether the math works out in your favor depends on a host of variables, including the sticker price of your current plan, how much time is left on your contract, and how much your current phone is worth to T-Mobile.

Regardless of whether T-Mobile's bold new plan entices you to leave your old carrier, though, you should still be glad Legere is offering this deal. "What we're doing is ending contracts, forever, for everybody," Legere said on Wednesday. More colorfully, he added:

We are either going to take over this whole industry, or these bastards are going to change, and the whole industry is going to shift. I don't give a goddamn which. I can't wait to watch the peckers scream and cry. [Legere]

When Legere called the wireless industry "stupid, broken, arrogant" on Wednesday, he "hit the nail on the head," says Thomas Halleck at the International Business Times. "This vital, emerging technology is shackled to greedy telecoms, and we are hoping that someone, be it Legere or anyone else, is capable of lowering prices and making it easier for consumers to move to another network if they are not happy."

Whether or not Legere is able to make good on his boast, he already appears to be rattling the competition. T-Mobile added 4.4 million customers in 2013, including 1.6 million in the fourth quarter alone, making it the fastest-growing wireless company in the U.S. Its larger competitors are reacting by offering their own no-contract plans, and AT&T even apparently tried to pre-empt Wednesday's move by offering T-Mobile customers up to $450 to switch to AT&T.

"From a consumer perspective, what T-Mobile is doing is good for everyone," analyst Jan Dawson at Jackdaw Research tells The Boston Globe. "It's lowering pricing. It's triggering other carriers to do similar things."

Attacking the two-year contract is T-Mobile's biggest play, though. The two main things Verizon and AT&T have going for them are superior coverage — T-Mobile mostly serves large urban areas right now — and inertia: They have the lion's share of U.S. wireless customers, and it's an expensive pain to port your number and change carriers. They need the two-year contract to encourage that inertia. T-Mobile's biggest obstacles to getting people to move are its larger dead zones and convincing people that paying full price for a phone is in their long-term interests.

So far the numbers suggest T-Mobile is winning — and at its rivals' expense, no less. "It's fun to win," Legere said on Wednesday, before twisting the knife. "It's even more fun when somebody loses and hurts while you're doing it." That's not a very nice thing to say. But it's good news if you own a smartphone.

* It was Sprint's Dan Hesse, if you're wondering

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Peter Weber

Peter Weber is a senior editor at, and has handled the editorial night shift since the website launched in 2008. A graduate of Northwestern University, Peter has worked at Facts on File and The New York Times Magazine. He speaks Spanish and Italian and plays bass and rhythm cello in an Austin rock band. Follow him on Twitter.