T-Mobile: Adds iPhone Ditches 2-Year Contracts

T-Mobile announced Tuesday that it's eliminating its two-year contracts in an effort to make its plans more transparent. Subscribers can pay off their phones in two years, and the cost of their plans will go down. T-Mobile is currently the No. 4 carrier.

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Mobile phone carrier T-Mobile is trying to lift itself out of fourth place. At a press conference yesterday, it announced it was adding the iPhone to its line up and ditching two-year contracts.

But NPR's Laura Sydell reports that may not be enough.

LAURA SYDELL, BYLINE: T-Mobile took a lot of digs at the two-year contracts all mobile carriers offer at its Manhattan press conference. It opened with real woman on the street video.

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ANNOUNCER: Would you rather sign a two-year mobile contract or get a root canal?

UNIDENTIFIED WOMAN: I'd rather get a root canal.

SYDELL: Then, T-Mobile CEO John Legere fired his own shot.

JOHN LEGERE: The rate plan's so complicated they make no sense.

SYDELL: By contrast, Legere says the new T-Mobile plans are simple. Three tiers - $50, $60 and $70 a month for unlimited service. And you can quit whenever you want. You can get a new iPhone for 99 bucks up front and $20 a month to pay it off over two years.

Gartner analyst Hugues De La Vergne was skeptical that the new pricing plan would draw more customers.

HUGUES DE LA VERGNE: T-Mobile's simplifying the rate plan side of things. But they're actually confusing the device side.

SYDELL: So, you may not be locked into a contract with T-Mobile, but if you leave and want your phone, you have to pay it off in full or continue to pay T-Mobile 20 bucks a month.

De La Vergne says T-Mobile may have a problem with another announcement yesterday. The company says it will reserve the right to restrict so-called unlimited $70 a month plans if the customer starts hogging too much bandwidth watching HD videos and streaming music, which is after all, what everybody wants to do.

Laura Sydell, NPR News.

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