Apple's venture into the iPhone financing business could deal a blow to the company's wireless service provider partners.
Until its Sept. 9 announcement that it will sell the new iPhone 6s on a 24-month installment plan, Apple had sold its own phone only at full retail price. Under its new iPhone Upgrade Program, the company will offer the an unlocked version of the new model for $32.45 a month over a two-year financing period.
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Members in the program also get Apple Care and the right to turn in their phone whenever a new one comes out at no charge (though the payment clock restarts). It's a decent deal that guarantees customers access to the newest iPhone without making a long-term commitment to a specific carrier.
That's bad news for the four major wireless providers, and T-Mobile wasted little time in making iPhone fans what appears to be a better offer.
What is T-Mobile doing?T-Mobile, under its dynamic CEO, John Legere, has made its customers (and anyone who wants to switch) an offer that will be hard to refuse. The company explained it in a Sept. 10 blog post from Legere, which described the deal as "a major disruption."
At the end of the 18-month period, customers have the right to hand their phone back at no additional charge. If they want to keep it and own it outright, they can pay $164 more and do so. ''Your total cost to own your phone is just $524 -- that's a screaming deal.," Legere wrote. "It's special introductory pricing for our launch, and it won't last long."
How the numbers work outNo matter how you slice it, T-Mobile is offering a better price. On a monthly basis, $20 is less than $32.45 (and still less than the $27 Apple will sell the 6s for without free upgrade rights or Apple Care). On an overall basis, people buying from Apple who pay $32.45 on the upgrade-included/Apple Care deal will spend $584.10 in the first 18 months, while T-Mobile customers will spend $360 -- meaning they will spend less even if they kick in the extra $164 to buy out the phone (a $524 total cost).
Over 24 months, the Apple customers will pay an astounding $778.80, and even those buying on the $27-a-month, no-frills plan will have doled out $648 -- basically the full retail price of the phone. The pricey Apple deal does come with Apple Care, which acts as a sort of device insurance, but T-Mobile's plan is part of its Jump offering, which includes insurance.
T-Mobile has scored hereWhile Apple is offering customers a way to have an unlocked phone not tied to any one carrier, T-Mobile has a better price. The company is also offering customers what it's calling a Lifetime Coverage Guarantee:
T-Mobile has essentially answered every possible consumer objection and given iPhone 6s users and potential users real financial incentive to sign up or upgrade.
The article Here's How T-Mobile Is One-Upping Apple's iPhone Deal originally appeared on Fool.com.
Daniel Kline owns shares of Apple. He's pretty sure he's going to make the switch. The Motley Fool owns and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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