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T-Mobile drops contracts and slashes prices: What it means for you

Consumer Reports News: March 26, 2013 06:08 PM

T-Mobile is ending contracts and slashing prices for both service and phones, a refreshing change from the complex plans and high costs that irritate many phone users. That could save a T-Mobile customer several hundred dollars over a two-year period compared to plans from AT&T and Verizon.

T-Mobile is also expanding its lineup of popular phones to include the Apple iPhone 5, which it will begin offering on April 12, along with the BlackBerry Z10, Samsung Galaxy S 4, and HTC One.

The company's iPhone 5 pricing plan shows just how radical its new approach is: You'll pay $100 upfront, plus $20 a month for 24 months. After that, there's no charge for the phone. AT&T and Verizon charge $200 initially, plus a monthly fee (included in your service bill) as long as you use the phone. So you might be paying for the phone long after you've forked over the full price.

This approach can save you big bucks. For example, an iPhone 5 with unlimited everything, including data, will cost T-Mobile subscribers $2,260 over the course of 24 months. Verizon and AT&T don't have unlimited plans, but heavy users can expect to consume at least 4GB per month. An AT&T individual plan for unlimited voice, unlimited texts, and 3GB of data (highest amount available for individual iPhone 5) currently costs $120 per month, or $2,880 over 24 months. The savings with T-Mobile would be even greater after two years, when it stops charging for the phone. (See a pricing breakdown in our table, below.)

Find the right phone and service for your needs and budget: Check our buying guide and cell-phone and carrier Ratings.

It's not clear how much you'd have to pay T-Mobile if you want to stop the service and return the phone, though. At today's press conference, T-Mobile officials said disappointed users would pay a fee based on the phone's current "market value."

T-Mobile says its newly launched 4G LTE network will reach 100 million points of presence by mid year and 200 million by year's end. As on AT&T, when an LTE 4G network isn't available, T-Mobile 4G phones will automatically switch to the carrier's other, more widely available 4G network based on HSPA+ technology. Company officials said they'd welcome AT&T subscribers with an iPhone 4 or 4S, which is compatible with T-Mobile's slower 4G network.

Bottom line: Though there are still questions about early termination and other fees, T-Mobile's Simple Choice plans and new phone pricing is a big step in the right direction

—Mike Gikas and Jeff Blyskal

Carrier Upfront cost of iPhone 5 (16GB) Monthly service for one line
T-Mobile $100 plus $20 per month for 24 months $50 for unlimited voice and text, plus 500MB of data; $60 with 2GB of data; $70 with unlimited data
AT&T $200 Individual plan: $120 per month for unlimited talk and text and 3GB of data
Verizon $200 $40 for unlimited voice and text; $50 for 1GB data shared by all; $10 more for every 2GB jump after that

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